4. Swing traders trade at low cost
It is essential to a swing trader to trade at low cost. As he enters several trades a week, he wants to keep this cost as low as possible.
Suppose you trade UK stocks and your trade size is about £10,000. Just your stamp duty (0,5%) will cost you £50 in and £50 out, which totals 1% of your trade.
As a swing traders target is often 1 to 3%, 1% as a cost is simply too expensive. CFD's (Contracts For Difference) offer a solution as stamp duty can be avoided.
The transaction costs on CFD's are quite moderate. The broker WH Selfinvest charges low commissions on stock CFD's.
Example: A £10,000 transaction on stock CFD's would cost £3.5 + 0.054% = £8.9 or 0,089%. In and out would cost less than 0,18%. This is acceptable.
Other CFD brokers charge a percentage and a minimal commission. For example, IG Markets charges 0.10% with a minimum of £10. The trading cost, in and out, would cost £20 or £2.2 more than WH Selfinvest.
This seems a small difference but suppose the swingtrader executes 4 trades a week or 200 trades a year? The difference would total £440 ... .
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