Which Commission-Free Broker Should You Use?

The rising tide of the commission-free broker…

Yesterday there were a ton of articles about commissions ending. Before last week, Robinhood was the ‘free’ brokerage everyone talked about. Then Interactive Brokers announced Interactive Brokers Lite, which is theoretically commission-free.

Within a matter of days, we’ve seen Schwab, TD Ameritrade, and now E-Trade go commission-free.

Now everyone’s messaging me…

“This is such a great day!” 

Just looking at the headlines … everyone’s excited to trade more.

Commission-Free Broker: Headlines Don’t Tell the Whole Story

This is a screwed up industry. Look, I get it. If I didn’t know this stuff…

… if I was just starting…

… I would probably be excited by these announcements too.

The E-Trade Baby Needs a Suit of Armor

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You’ve seen the ads…

The cute little E-Trade baby with all the knowledge and skills…

“Look how easy trading is…”

Sorry to pop the bubble, but studies show that 90% to 95% of traders lose. If that dancing baby were real, it would be a bloody baby … THE BLOODY BABY WOULDN’T EVEN BE ABLE TO BE SHOWN ON TV!

Which is why I have to warn people about this new development.

For me, commission-free trading doesn’t change ANYTHING. Commissions don’t really matter to me — they’ve always been a negligible cost and always will be. And you don’t become a millionaire by cutting your commission costs on trading! This move by the brokerages is like dangling a carrot in front of a vegan’s eyes.

Unleash Your Inner Trader or … the Lure of Commission-Free Broker

This is a trick. A trick to get poor people to trade more.

First, commissions are only $5 or $10 per trade. So you’re talking about saving what it costs to buy a few cups of coffee at your favorite coffee shop.

But…

It increases the gambling aspect of trading. Why? Because now you don’t have to pay commissions. So you can, theoretically, trade more. This is little ticky-tacky stuff that lures in degenerate gamblers. It gets people excited.

You should not be trading more.

Commission-Free Broker Fails to Fix the BIG Problem

What’s the big problem? The problem I’m trying to help you solve?

People overtrade and have no idea how to plan trades. 

I wish they were tripling commissions to make a higher barrier to entry. If fees were higher, people would be more hesitant. There wouldn’t be as much overtrading.

Churning Your Account Won’t Make You a Millionaire

Frankly, most people aren’t gonna become millionaires by overtrading. In fact, they’ll churn their accounts even more. So what’s gonna happen with all these brokers announcing commission-free trading?

My guess is it will increase trading volume. Which means more people will lose. Roughly 90% lose now. But it will probably go up … maybe 92% or 95% will now lose.

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The Worst Mindset Trap I’ve Ever Heard

I know this is controversial. Everybody wants to save money, right?

But frankly, the race to commission-free reinforces the wrong priorities. People wanna cheap out. And they think they’re gonna do better saving a few dollars.

But traders don’t lose due to commissions. They lose because of overtrading. Or taking bad trades. Commission-free reinforces both overtrading and taking bad trades. People will take more bad trades, trade a lot more, and get more frustrated.

That’s why I had to write this post and get it out to you fast.

Crazy how all brokers going commission free are getting poor people into trading more, but that won’t make you rich. You MUST have patience and wait for only the best plays, Commissions always have and always will be irrelevant, study the fuck up and don’t give into these games!

— Timothy Sykes (@timothysykes) October 3, 2019

Are You Prepared for Battle?

This is a battlefield.

Investors and traders are losing the war. They’re getting crushed. If you compare trading to war, then you could compare commission-free trading to a military parade. Everyone’s excited. We all want to see the shiny stuff going by.

“Look, it’s a parade!”

But they’re masking the ugly reality. So when someone messages me and says, “this is so great…” I have to shake my head. No, it’s not.

If you go into the nuances of it … it’s not so great. It’s masking the big problems in the industry. And now, poor dumb people think they’re getting help. The fact is, they’re getting screwed even more.

Again, this is finance. This is trading. It describes pretty much everything that’s wrong with this industry and…

… explains why I teach.

A Warning to Those Who Value Education

Now you know why I have to warn people about this.

My job is to educate based on reality. It’s my job as a 20-year veteran to dispel the myths and expose the ugly realities.

Here’s a reality…

The firms are still gonna make money. Some people are saying “Oh my god, are these companies gonna go out of business?”

No.

If you look at what their actual business is, they make less than 20% of their revenue from commissions. In fact, TD Ameritrade expects to lose roughly 15%–16% of its current revenue. For Schwab, it’s only around 7%. E-Trade expects around a 20% drop.

So, yes, it seems like they’re losing a small portion of their business.

But remember these are still the same brokers. And they’re luring dumb gamblers with this scheme. They definitely have ways of making it up on the back end. A side newbies and poor people don’t even know about…

The Rich Get Richer While the Poor Get Poorer

It’s kinda sad.

The poor think they’re getting richer when the rich are actually tricking them.

“Yay! Poor people … get excited … we’re lowering your commissions!”

And the poor people are like…

“Yay! Let’s save $5 or $10 because I’m poor and it means a lot to me!”

But they don’t realize what’s really going on.

The Hidden Costs of Commission-Free Trading

The brokerages are gonna find new ways of making money. How? Lots of hidden fees. Like payment for order flow. What’s that? What’s payment for order flow? Glad you asked…

Brokers get cash payments for routing orders through specific electronic trading firms. It’s how Robinhood can afford to be commission-free. But like I’ve been saying for a while about Robinhood…

… you can save on commissions but get crappy executions. What’s the point of saving $10 on a commission if you lose $250 because your order fill was crap? And that’s just one example.

When the brokers go commission-free they’re gonna make a little extra in lots of other ways. Like those crappy executions. Or market making. Or by charging you an extra tenth of a penny per share. If you trade with a big account, it might cost you an extra $400. Or more.

No matter how they do it … you’ll likely pay more in ways you can’t even see.

Remember, like I said, right now roughly 90% of traders lose. And this will make the percentage go up … maybe even up to 95%. They’re luring in the poor. And, frankly, the poor get poorer … and the rich get richer.

My Job Is to Cut Through the BS

Those of us who make millions laugh at this stuff. Not at the poor people, at the brokers using the race to zero commissions to lure in suckers.

It’s my job to teach you the ways of the rich. If you’re poor, I’m on your side. Think of me as your champion. I want to educate you so you’re prepared for battle. I want you to see through the BS and change the mindset of cutting costs when it’s not in your interest.

The Rich Don’t Like It

Why? Because I keep being real in an industry full of fakes. And now, it’s an industry with a shiny lure to draw you in and annihilate your account.

You could ignore me. Feel free to enjoy the big no-commissions push. Get screwed on executions. Join the 90%+ of traders who lose…

You get to choose.

Or, heed my warning, learn to plan your trades, avoid overtrading and be willing to pay commissions for better service.

You can thank me later. Hell, you can call me Robin Hood if you like…

Just not the broker.

Trading Challenge

If you’re ready to go deep, to really understand the nuances and build a foundation of knowledge to last a lifetime, apply for the Trading Challenge today.

Be prepared for transparency. Get ready to immerse yourself so you get the most out of your membership. But only if you’re ready. Do you have what it takes?

What Students Are Saying

Check out what my students are saying … this week alone:

On Profit.ly 

From Afoxe40:

“So glad I attended the inner circle at the summit. Jump started my trading. So much more confident. Made a nice little profit of $1100 following the rules and taking profits on $PURA. Love the morning dip buy. in at .11 and out .13. Go to the inner circle live trading if you ever have a chance. Worth it!”

And user BrandoKlein:

“6k shares in $UNRG @.3650 out @.41= +261.60 !”

And these Profit.ly users:

Bloodhound: “timothysykes in response to your question re results today. Bought NAKD 20K just premrkt @0927 hrs for .0575 and sold @0932 hrs for .64. Good process and no risk on overnight hold, which was important for this newb. Had to be away the rest of the day, so really didn’t do anything later as couldn’t have watched it.”

redwagonrider: “[expletive deleted] YA TIM there is the power. knowing how the market is reacting to super strong stocks at the end of the day. Taking the trades that are setting up. focusing only on the biggest % gainer. Effing love learning from you! adapt adapt adapt”

michaeldufresne: “timothysykes $500 on a 2k account on NAKD and $SPNV.” 

cfcmickt: “Bought $CLSI Friday into the close at $0.028 FGD low price OTC as this had further green days after the first recently. Sold this morning for $0.036. Took my near 29% profit, did not want to be greedy and hold and hope for more. Safe profits. Yet another green month.”

MOKI: “$CLSI in at .0608 and scaled out, half at .0822 and the other half at .0870 +239.”

Or this from one of my top young students…

Jack Kellogg: “locked $CLSI 35k from .0335, sell .046s. $400-ish. nice way to start the week.”

Tweets from Students

Like this one from @sublimetrades:

Awesome trade on $CLSI otc breakout. Long 40k @ .0455, added 25k @ .048, and 55k @ .0565. Scaled out in the mid .06s to mid .07s for $1,860 profit (18.6 R). $2k a day keeps the real job away. #Forward🐢 #MondayMotivation @timothysykes pic.twitter.com/YxOO9XkeDn

— John Papa (@SublimeTrades) September 30, 2019

And this from @GaRlk888:

$CLSI OTC multi-day breakout.
Nowhere else you can make 24% to your deposit per day risking only 3 %. Awesome setup. Thank you @timothysykes ,@kroyrunner89 ,@Jackaroo_Trades ,@Dom_Mastro10 ,@iVarunMad . pic.twitter.com/F30t3FUmtp

— GaRlk088 (@GaRlk888) September 30, 2019

Or this one from @Chesskid90:

bought 7k of $CLSI at .0365 sold 5k at .055 holding last 2k for a homer 🙂 but only bcuz i locked in more then 3/4 of my shares already for a decent profit on small account @timothysykes

— Sean Riddell (@Chesskid90) September 30, 2019

And @BHilton124:

Finally had my first $100+ day since I started trading mid-September. Bought $CVSI on first green day at 1.83 sold at 2.03 during the (slow) morning spike. Partnership catalyst w/major retailer. @timothysykes @StocksToTrade pic.twitter.com/WLeN6ogiBo

— Brandon H (@BHilton124) October 2, 2019

Or @Aristi0714:

nailed $UNRG with some patience for $2750 nice MDB , locked in $736 on $DEWM still have some shares over the weekend. closed the week up $3500 🔥🔥@timothysykes pic.twitter.com/WNNax3Hjxf

— Carlos (@Aristi0714) September 28, 2019

And this from @MalvarezJj:

Milking $UNRG to the max! Got 26% profit on small account on $PURA yesterday.
Thank you for your teachings, Master Sykes!!!

— Coward Trader (@MalvarezJj) October 3, 2019

And @iceestocks:

Bought 2000 $spnv late yesterday at $.19 and held overnight. Spiked to $.25 and sold for $240 profit. It kept going up to .33 but I could hear @timothysykes “take profits!!” I left another $300 but not a bad trade from $500 account.

— iceekikistocks (@iceestocks) October 1, 2019

And new Challenge student @InceNY1:

I’m done today! As a new challenge student Time to study!! $1345.64 profit @ $NIO $824.18 / $SPNV $521.46
I Will start to post all my trade @profitly
Thanks @timothysykes @StocksToTrade @tbohen pic.twitter.com/eYlfuDE0Xl

— ERIC INCE (@InceNY1) October 3, 2019

Do you have experience with zero-commission brokers? Share in the comments below. New to trading? If you get it, comment below with “I’d rather pay commissions than get crappy executions.” Comment below, I love to hear from all my readers!