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Warrior Trading // Ross Cameron // Day Trade Warrior

What's up, Everyone Ross here from Warrior Trading. so this has been a pretty crazy week. the ultimate battle in the Commission war and the race to zero now this week. Interactive Brokers TD Ameritrade Charles Schwab and Etrade have all announced they are going 0 Commission with a little disclaimer that 0 doesn't always mean 0.

So that's especially true with Interactive Brokers and their product offering because they've put out a totally new product that is a free Commission product and then they still have their regular product which is premium so you guys can check that out in the video specific to Interactive Brokers link is in the description. but right now we're gonna talk about each raid. Each raid was the last one to drop to 0. start with Interactive Brokers, then trial Schwab, then TD Ameritrade and lastly each raid Now I Have a soft spot in my heart for each raid because it's one of the brokers that I used when I was getting started.

But I will tell you and if you're someone that uses each raid, feel free to comment below what your thoughts are on this big change. I'll tell you when I switched from each raid to a direct access broker I thought it was a joke how fast the commit the the executions were I was like this isn't even real. This is insane. Literally, as quickly as I would press the button, boom, 2,000 shares would be right there.

Whereas with each raid and with Ameritrade I had gotten used to pressing the Buy button and sometimes having to wait a few seconds before the order pops up is Phil executing filled and then I can see what my price is. So I haven't trained with the trade for a really long time and at this point I'm not really interested in going back despite the zero Commission offer which is very appealing on the surface. But let's talk for a second about the real cost of free trades and let's do that by starting with a brief look at Robin Hood Alright so I'm gonna put Robin Hood here up on my screen. So Robin Hood came out in 2013 2013.

It comes on the scene, free trades and people were messaging me all the time. They're like are you gonna switch to Robin Hood Are you gonna get in on this is amazing. Zero commissions. It's awesome right? Well here's the problem.

You can see the pictures of the the Robin Hood app there on the screen. Robin Hood is a mobile app and so for me for the strategy that I use, I can't trade quickly on a mobile app and I just simply can't trust a mobile app to execute big orders and big trades. I've had days where I've made thirty forty thousand dollars and there is no way I would have been able to do that. trading on a phone, the amount of money and the amount of risk that I've taken.

it's just I can't trust it to an iPhone app. you know I'm sorry, it's not that I don't love my iPhone But I need the the same trading software that traders are using with a hundred million dollar type of positions and Goldman Sachs you know you want to use real software if you're going to try to compete with the the big traders out there and make some serious money. So Robin Hood for me, I was never interested in it I checked it out I Saw what it was about and what I realized was that the cost of free trades no Commission was that you didn't have very good member support or customer support. Number one, Number two: The The tool.
The app took away a lot of the things that are essentially a standard feature on real trading software, which is hotkeys: the ability to press a button and have an order go through level to market depth, the ability to see the depth of the market where all the buyers and sellers are stacked up. Without that, it's really hard to understand the sentiment behind a stock. and so when you pull out these basic tools, you can certainly drop the price of a platform down quite a bit, but to the point where it's not really practical for a trader. And so Robin Hood's headline here is Invest Commissioned Free.

Well, I Think that that's accurate investing Commission Free. Meaning, if you've got five hundred dollars and you want to buy a couple shares of Apple or Facebook, you can do That for free and that's cool. and I think that's what they really appeal to. But clearly over the last few years they have taken some market share away from Ameritrade and away from Etrade and some of the other brokers out there who offered great platforms but have charged anywhere from $5 to $10 per trade.

And obviously that adds up. And as a beginner trader or maybe a passive investor, that might be enough to say. Now I'm just gonna use my Robin Hood app and so the Commission War began and that now is six years ago. But it's really I think reached the peak today or this week with brokers dropping their Commission's left and right.

So it started with Interactive Brokers Last week, then Charles Schwab dropped to 0 TD Ameritrade stock dropped 36% and so they kind of I don't know, maybe reactively or what they said. Okay, we're going to 0 because they don't want to lose all of the client assets that they're holding. There's a lot of value to that. So let's think about this for a second.

E Trade currently generates and this is a stat that I pulled off of I think it was Bloomberg 17% of their income from commissions. The stock dropped about 20% which makes sense because you know they just lost by drop by going to free commissions. They just lost that that money. And they've got currently about three hundred and fifty billion dollars of client assets.

Three Hundred and Fifty billion dollars. That sounds like a lot. but T V-- Ameritrade has one point Three trillion Charles Schwab has three point Seven trillion Charles Schwab only makes about 8% of its revenue from commissions, so for them to cut commissions to zero, it's not going to take as big of a hit. And in fact, if it entices more people to open an account there and then they have more assets under management, ultimately, that's a win-win right? But for brokers that really focus primarily on the trading aspect and not investing products and things like that, the hit to them of these Commission wars is is bigger and more painful.
Certainly, with Ameritrade losing ten billion dollars of its market cap and dropping 36 percent now E trade with 346 billion, Three hundred Fifty billion of assets under management, you know the effect for them is also pretty significant and their stock has dropped quite a bit. Mike My real question is going to be now that they're offering zero Commission What does that mean for traders that are currently there? and I want you to comment below what you think that's gonna mean: Are they going to have to pull out some of the things that they've currently been giving for free and make that a premium product like the full, the the day trading platform the the Essure a pro platform? the complete market depth? you know I don't know One of the things that a lot of brokers have done and this is not brand new, but brokers have been doing this for a while is they don't charge you a routing fee if you let them use their smart route. Now the thing with smart routing is that it's really smart for the broker because it will route your order through a venue that will give the broker a little bit of a kickback on every share that passes through. It's a call it Ecn, credit or a rebate for adding liquidity to the market and so not to get overly complicated.

But right now if I put up a ten thousand share order to buy a stock like a ring central up there I could get paid about fifteen dollars from the exchange for putting my order out there actually from the market maker because I'm adding liquidity to the market I'm adding my money. So I get a little bit of a kickback. so when brokers drop, Commission's down well you know that they're gonna have to make it up somewhere else and so will they make it up through the order flow how they route your order. so they start getting a kickback and if they do, that's most likely going to come at the cost of execution quality for you the trader and that's why I prefer to only trade it brokers that allow direct access routing meaning I get to choose the route that I send my order through and I send it through a route that's best for me.

So I can get an awesome fill and awesome exit because ultimately that's gonna be a lot more important than making an extra ten or fifteen dollars on ten thousand shares. Right? Ten thousand shares. Every penny is a hundred dollars. am I Really gonna? You know, care about? you know, 15th of a penny in terms of profit for $15 No, not at all.

I would rather get perfect execution and so that means the brokers that I use are gonna be a little bit different. Now you can click the link below. I'm gonna have a link to the brokers that I currently recommend for active traders like myself and like many of you I Think a trade is great I Think that there's definitely some advantages there for a passive trader, someone who's not actively trading every single day. I Think you can do really well with these trade, but you know if you are trying to trade 3 to 5 times a day I Think you're gonna lose more in your execution price then you're gonna save in discounted Commission's and I could be wrong, but but that's that's my gut instinct on it.
and so I'm not likely to switch to E Trader Ameritrade as a result of these changes. and I don't suppose that a lot of people will switch, but I Think what? These brokers are really afraid of is people leaving them right because then that's less money that they've got in client assets. And so you look at some of the other brokers right now that they haven't made any announcements yet. A broker like Fidelity? well, you know Fidelity's got 2.5 trillion dollars in assets under management, so they're right up there next to Charles Schwab Which if we were going to guess or if I was gonna guess, it would make me think that the percentage of revenue that they get from commissions is probably pretty low.

so it probably wouldn't cost them as much to go down to a zero Commission model. But you look at a broker like Lightspeed or center Point. Well, those are brokers that really cater to active traders and so it's very unlikely that they're gonna drop to a zero Commission model because it just wouldn't make sense. There will always be demand for those types of brokers that offer the best tools direct access routing and hotkeys because experienced traders professional trainers are gonna need them.

So I'd really love to hear your thoughts on these big changes with Treet Ameritrade Interact Brokers Charles Schwab. you know it's it's some really interesting stuff. I I Think it's you know, ultimately gonna be good for most traders. but I Don't want you guys to think that free is really free because there is a cost to these free trades.

Alright, so questions, comments, leave them below and I'll see you guys in the next video if you're still watching. You must have really enjoyed that video. So why not subscribe and get email alerts any time? I upload new content. Remember when you subscribe, you become a member of the Warrior Trading family.


By Stock Chat

where the coffee is hot and so is the chat

23 thoughts on “What?! e*trade slashes commissions to zero”
  1. Avataaar/Circle Created with python_avatars Aaron Fishburn says:

    I'm just getting curious about stocks and I opened an account with etrade and put $50 in to try it out. I think I read somewhere that you need to have at least $500 in your account or etrade will deactivate your account, is this true?

  2. Avataaar/Circle Created with python_avatars Dianne Hensley says:

    I just made my first ETrades…poor customer service…high commission

  3. Avataaar/Circle Created with python_avatars yair says:

    hey ross
    love hearing you . sharp guy 🙂
    i want your opinion about :
    my plan is trade 1000-3000 shares per trade with stocks 3$ to 8$
    my broker offers me fast execute platform , 10$ fix price no matter the amount of shares
    and half cent for direct access ( for the market makers ) lets say that in a trade of 2000 shaers i'll pay 10$ the fix price + 10$
    i really want to get your answer please .

    thank you

  4. Avataaar/Circle Created with python_avatars Rob Peters says:

    Robin hood is trash

  5. Avataaar/Circle Created with python_avatars Frank0020 says:

    I don't get it in my E-Trade Roth I see $ commissions I did 2 mutual funds..I don't execively trade. I am more hold, and swing. Rarely pre-market, and OTC.

  6. Avataaar/Circle Created with python_avatars me says:

    thank you for the teaching it's been profitable I've watched a number of your videos. What broker or software do you use for your large accounts where execution time is key.

  7. Avataaar/Circle Created with python_avatars RARA says:

    What platform are you using?

  8. Avataaar/Circle Created with python_avatars FinalFlashGaming says:

    So would etrade be good for small/long-term investments for say periods of 3-5 years, and the other brokers you recommend are mostly for day trading?

  9. Avataaar/Circle Created with python_avatars Ebenezer Valvi says:

    My questions comes from the real time offerings. E-Trade has level 1 but its a min account balance for real time, and I would think that spans down to level 2. Ameritrade says the offer both level 1 and 2 for free….. am I confused here, or does Ameritrade come out on top because of this?

  10. Avataaar/Circle Created with python_avatars tomorrow I love you says:

    Hey your really smart

  11. Avataaar/Circle Created with python_avatars Bre says:

    E trade available for overseas users?

  12. Avataaar/Circle Created with python_avatars watchotrade says:

    He is correct about the direct access broker compared to the big brokers the fills are insanely fast with direct market access.

  13. Avataaar/Circle Created with python_avatars Nathan Canady says:

    So it wasn't just me when it comes to placing a trade. On my Note 8 it takes forever to place a simple options trade.

  14. Avataaar/Circle Created with python_avatars Waylon Jeffreys says:

    How come you do not talk about Webull?

  15. Avataaar/Circle Created with python_avatars JCRealtor Realtor Juan C Reyes says:

    You didn't mention webull wich is free and they actually have a good platform I don't know if is good for day trading but is definitely better than Robin hood…

  16. Avataaar/Circle Created with python_avatars Marcelo Azevedo מרסלו אזבדו says:

    how do you know which route to choose when using direct routing?

  17. Avataaar/Circle Created with python_avatars Jeff Cokenour says:

    I use E-Trade but they're not built for day trading in my opinion

  18. Avataaar/Circle Created with python_avatars Thoughtsonpaper says:

    I love this discussion. I was shocked when I saw the new 0.0 commissions. It probably is some business gimmick to get more cash inflow (aka new people setting up accounts with CASH BALANCES.) These brokerage companies will then use these cash balances to do the same things the banks do with your money balances. They make certain investments off of our assets… though all individual accounts should be able to be accessed, withdrawn, traded in full, etc. at any time. Just not all of them at once! Given the current Trillions of balances in the brokerages…. if something is abused with say derivities or poor company investments with client balances… we could get another major American or global financial crisis.

  19. Avataaar/Circle Created with python_avatars SOMOSdaytrader says:

    Ross i completely understand your point but as you said they customer assets the money deposit on they banks for all brokers is the most import thing because they play with your money this is a free money for then to invert and make tons of money so i do not think so that free commission will make in the long term any damage to the business unlike will keep they customer and will bring new customer , and regarding the quality of the execution honesty i used before CME that provide direct access and i always have problem with my execution and since i start use TD-ameritrader a year ago me personally i never have any issue with my execution maybe is not fast as the one you have on light speed but is good enough for me that i am an active trader , for pleasure the colors were made some people like red some people like blue but they all are good .

  20. Avataaar/Circle Created with python_avatars Erick F says:

    What brokerage do you use?

  21. Avataaar/Circle Created with python_avatars Duffle27 says:

    Ross, maybe you’ve mentioned it and I didn’t notice, but did you say what broker you use? Also is there an account minimum? Thank you in advance. I appreciate what you do. Cheers!

  22. Avataaar/Circle Created with python_avatars Randy says:

    Has anyone tried Webull? They seem to have decent hotkeys and user friendly. Also $0 commisions. Desktop platform and mobile app. Thoughts??

  23. Avataaar/Circle Created with python_avatars Jackson Rodrigues says:

    The only issue that I see with TD is that you can’t sometimes short a stock when the OS and float is low. In other words, you can’t borrow low float stocks. @ warrior which one do you use and suggest? Is there anyone that allows unlimited trading without PDT rule?

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