Finding a Broker
"Hey Joe! I need help finding a broker. I notice that discount commission rates are pretty much the same. So how do I choose?"
Commission is definitely not the most important factor in choosing a broker. Most important in choosing a brokerage firm is the per trade slippage, the difference between the stop order price and execution price.
Based on a study I saw some years back, ten orders were placed with five commission houses. All orders were priced in the same market at the same price, before the market opened. The difference in slippage from worst to best was over $800. Slippage one year for Rosenthal-Collins trading one and two contracts of the S&P, was over $20,000 per account. The floor broker for the majority of those trades was Mario De Bartolo. All the fills were supposedly legal. One order for 15 contracts was to sell at 45. The market took over two minutes to fall in one-tick increments to even money, at 00, before an up tick. All 15 contracts were unbelievably filled at 00. Slippage on the order was $3,375. A week later another order was slipped over $2,000, then all accounts were closed. Coffee once had the daily high and low in the opening range. I was filled on my buy stop and sell stop at the high and low of the day, 360 points times three. Legalized theft. The broker could have taken both sides of the orders. New York markets are notorious for their slippage, as is the Chicago pork belly market.
Any broker who allows this kind of slippage to occur on his customer's orders is not worth having as a broker. There are brokerage firms that carefully monitor the kinds of fills their customers are getting from the floor. If the fills are bad, they will dump the bad floor broker and use another. Bad floor brokers can be penalized that way. They lose the business. A good broker will do battle for his/her customers. That's why we use the broker we are currently using. If you want a referral, let me know. I'll be happy to give it.
Joe Ross
Trading Educators Inc
About Joe Ross:
Joe Ross has been trading for more than 47 years, and is a well known Master Trader. He has survived all the up and downs of the markets because of his adaptable trading style, using a low-risk approach that produces consistent profits.
Joe is the creator of the Ross hook, and has set new standards for low-risk trading with his concept of "The Law of Charts?." Joe was a private trader for most of his life. In the mid 80's he shift his focus and decided to share his knowledge. After his recovery, he founded Trading Educators in 1988 to teach aspiring traders how to make profits using his trading approach. He has written 12 major books on trading. All of them have become classics and have been translated into many different languages.
Joe holds a Bachelor of Science degree in Business Administration from the University of California at Los Angeles. He did his Masters work in Computer Sciences at the George Washington University extension in Norfolk, VA. Joe still tutors, teaches, writes, and trades regularly. Joe is still an active and integral part of Trading Educators.
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