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How I Saved 33% on Commissions

Did you know it is actually possible to have your online trading broker “pay you” if you decide to trade in a certain way? One of the hidden areas of the stock market that I was not aware of for a long time was the crazy fact that if you decide to “add liquidity” to the market, your broker will pay you. Let me try and explain in more detail as we hang out for a fireside chat.

How to Trade Stocks and NOT Pay Commission – https://claytrader.com/blog/how-to-trade-stocks-and-not-pay-commission/

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Transcript:

Welcome to another fireside chat.Today I just want to talk about a topicI've done before but not necessarilyon this playlist of the fireside chat, the vlog.But it's very important and maybe you saw by the headlineand you're thinking, wait a second,you saved money on your commissions.Yeah, it is actually something that can be doneand should be done.Now, is it always possible?No, but the one thing that I know you may be thinkingand it's, I'm not calling you stupid for thinking itbecause it's actually a very rational and logical thought,is, but Clay I know there's brokers out therethat don't have any fees at all.So why would I pay a commission,why would I even care about saving a commission.I'll just not pay anything at all.Fair point.And I'll say, well it depends.Some strategies, mine in particular,you need to have a broker that pays.Now that would be great if some day a broker showed upthat would allow me to implement my strategyin a zero-fee type of way.However that just doesn't exist right nowand I highly doubt that ever does.So yeah, if you're not trying to trade in a waythat would require the tool of a brokerthat is going to charge,then yeah, this video doesn't necessarily pertain to you.But if you are looking to get into more so the day tradingand that nature of the market, then you're going to needwhat is the first part of all this, a direct access broker.And direct access brokers are not going to be,what you usually see on commercials on TVas far as Schwab, Fidelity, E-Trade, things like that.And direct access brokers, they do charge fees yes,but they are very, very minimal.And you can also get savings meaning you could have moneypaid back to you for if you trade certain types of wayswhich I'm gonna get into.And what really kind of, like I've said,I've talked about this topic before.I think I have both a blog with a B articleand another video on the channel.But sometimes those get buriedso I wanted to bring it back up.And people clearly don't really see thembecause every now and thenI'll get a comment on one of my live trade videosthat's like, uh yeah that's really cool you made that,but what about the fees?It's like, this guy sucks, look at that, he made that amountbut how come he's not tellin' us how much fees he paid?Alright, again, I don't know if you should show upand start calling people nameswhen you don't understand the contextwhich those people clearly don't.But to be fair to them I can see how that would,how that thought would have popped in their head.But again, acting on that thought without full context,I think there's quotes out thereabout that's what would make somebody foolish.But we won't go down that path.But, yeah, how can it actually be possible,especially if you watch my trade videoswhere I do a whole bunch of trades.And you're thinking, wow.From what I see on TV, that's like $4.95 a trade.$5.00, $10.00, $15.00, $20.00,oh wow he just had like 80 bucks in trades.And he only made $150.00, well geez,that, the math's not making sense.I get it.So what I wanna talk about here is, remember,step one, direct access broker.You need to have a direct access brokeror else none of this really matters.But again, if you do want to get into the marketsas a day trader, as somebody that's trading quite often.If you do want to get into the markets,from options, there's things like that, then yeah,you are gonna want to have a direct access broker.It would be great if one of these zero-fee brokersallowed you to trade in and out of stocks as quickas you would need to.But if you think that you're gonna getsome sort of zero commission brokerthat has a phone app and you're gonna besome sort of like high paced day trader,you're living in fantasy land, that's not how it works.So like I said, at some point yeah you just have to payand it's worth it to pay.I suppose you could try to day trade in a very high,like I do for example, from your phone.But you're gonna learn very quickly,yeah, it's definitely worth payingbecause what I just lost out onbecause I couldn't operate quickly enoughwas a whole lot more than what those fees would have beento get in and out as quickly as I should have been able to.So with that all asideand making sure we're on the same page,direct access broker.And then there's a couple of lingo words out thereand I'm gonna go to my desktop here in a secondand I'll show you everything.But it's removing liquidity and adding liquidity.And what is going to depend on removing or adding liquidityis the location at where you either buy or sell.So depending on location, that is going to tell youif you're adding or removing liquidity.If you are adding liquidity to the situationyou're going to get paid which turns into,well in some situationsand I'll actually link that article below,you can actually make money in a literal sense,you can walk away ahead after the transaction is done.In other situations which I'll show here in just a second,yeah, you're not coming out ahead,but you are, as the title of this video said,I saved 33% over the entire month, on commissionsbecause I was adding liquidity.Now in other situations though,if you are removing liquidity,then that is where you are paying.You have to pay actually a little bit moreon top of what the normal base fee would be.Now these base fees are gonna vary, but they're very small.But still if you choose to, so that's the trade-off.If you're just out there always removing liquidityand we'll get to that in a second like I said,then yeah, your commissions and fees are gonna be higher.Now does that mean you break the bank?No I'm not saying that but it's not like no matter whatyou get a direct access brokerand wow, now I'm saving money, I'm getting paid to trade.No, it does depend on the locationof where you're buying or selling.So with that, let's go to my desktop.Welcome to my desktop here.So let's just hop right into it.Before I go any further though,when I say bid, when I say ask, when I say level two's,if that sounds like a foreign language to you,then really you're getting a little bittoo far ahead of yourself and you have other thingsthat you need to learn about.I don't say that in a condescending way.I mean we all start off as new.But if you have no ideawhen I say bid and ask and level two,wait, well what are you?That's fine, just understandthat you need to go and research those things morebefore you start thinking at all about getting involvedwith a direct access broker.So just reminder now, if you know exactly what I meanby bid, ask, level two, then let's keep going.Now remember, it kind of is the umbrella policy herein order for this to all be possibleyou need that direct access broker.I want to kind of break things down in different ways herebut we'll go through every single kind of possibility.And I will leave a little time at the endif you want to take a screen shot'cause I realize if you're brand new to this conceptand not aware that it existed,then yeah, maybe I'll go a little too fast here.But let's just start with the action,the action of what we're buying.And then the second key part here is,well where are you buying,where is the location of the buy.If you are buying on the bid, then what is that doingas far as the liquidity is concerned?Well that would be considered adding liquidity.And when you add liquidity, the result of that,as far as your results are going to be concerned,is you are saving money.And I am going to show an image when we go back to my deskand you'll see a previous month's worth of resultsand you'll see what I mean by that savings.But that is the result.If you buy on the bid you are adding liquidityand therefore your broker will pay youwhich equates in overall savings.Now what about the other side of things.Once again buying, however the location is at the ask.In this situation you are removing liquidityand when you remove liquidityyou have to pay a little bit moreon top of your normal broker fees.Now it's not gonna make or break you,but it is gonna be a little bit more for, again,because you're buying at the ask, you're removing,and the result is you need to pay a bit more.What about selling?Well if you're selling on the bidthen you are removing liquidityand you should know where this is headed.If you are removing liquidity the result of that is, yes,you do need to pay a little bit more.And then finally if you're selling at the ask,then in this situation you are adding liquidity.And once more when you are adding liquiditythat is where you are getting savings.So like I said if you do want to take a screen shot hereI'll give a few moments and then we'll go back to my desk.I hope you like my PowerPoint skills.But let's get to kind of a real life example here.Again, there is that link down below that you can clickwhere I literally made money tradingbecause the way it was set up I walked ahead'cause my broker paid me more than what I paid in feesso I came out net positive.But as I'm gonna show up on the screen herethese are my results from a previous month.And I chose this month because there was a whole lotof commissions that were generated.So it's kind of a situationwhere it really does go to show youjust the power of having a direct access brokerand then adding liquidity within your strategy.So right in that middle columnyou can see total commission of $1,081.93.So that is what I paid in commissions.And then right next door you have the regulatory feesand you can see that was at $83.99.And then you have the total fee cost.And notice how that number is actually a negative.The first two, commission and then the fees,were positive numbers.But the total fee cost is a negative number,meaning that is how much my broker paid mefor adding liquidity.So based on the location of where I was selling and buying,I was adding liquidity.And after the whole month was doneI actually added it in the form of $376.00.And to me that's pretty cool.That's a nice bonus that your broker is going to give youfor helping to add liquidity to the marketwhich is what keeps the market, essentially, orderly.If everybody was looking to remove liquiditythen that presents problems.And I have a video coming, I think we did the calculation,like four months from now, where I'll go more into that.So for you long term viewers,then maybe you'll get mad at me four months from now saying,Clay, I already saw that fireside chat.What are you talkin' about again?Then you know what, if that is you,then I thank you for watching all my videos,'cause if you're still watchingfour months from now, awesome.But let's get to the next part of thiswhich is, okay, well how much are they paying you?And that's kind of the secondary thing is,it does vary.There's different routing fees that exist out thereand routing just means what market-maker,what ECN is actually going out thereto execute the transaction for you.If you have no idea what I'm talking about,that's totally fine, that's probably a signthat you're just a little on the newer sideand you have many other bridges to crossbefore you would ever get to usingsome sort of direct access broker here.But there are differences betweenhow much somebody would pay youor what it may cost you if you remove liquidity.So this is just a screen shot here that I wanna showthat's going to just kind of dictate the differences.So up at the top there you see the equity routing fees.And then the venue is just simply the market-maker,whatever you wanna call it, that is going to go out thereand execute the transaction for you.And the key one here is ARCA.Notice all those other options have parentheses around them.That means it's going to cost you money.Just in accounting, when you have parentheses,that would imply negative.However, ARCA, that bottom one, has .002 with no parenthesesmeaning whenever you add liquidity,hence the add liquidity column,you are getting paid .002 per share.I get it, .002 what does that matter?Well that's why I wanted to show you the month.It actually added up to $373.00 or 76 or whatever that was,or it added up to 33% savings.I mean, I'll take 33% savings on my commission,'cause a penny saved is a penny earned.So that just means, really, I earned 33% morerelative to the commissions than what I paid.That's a good return on investmentfor just adding liquidity to the situation.So just be aware of it.That does exist out thereand it's something that you need to be aware of,and if you wanna take advantage of it.Maybe the big problem with your strategy is right nowis you're so bent on I don't want to pay any fees.Did you ever considerthat maybe if you paid a little bit of fees,you'd be able to just get in and out of thingsthat much quicker, which in the long runis actually going to save you moneybecause if you can't operate the wayyou need to operate within a strategy,then that's gonna cost you way more moneythan any sort of minimal feeslike a direct access broker would charge you.So maybe that's what you should be considering.But regardless, if you do get into a direct access broker,just make sure and always,I'm not saying you have to add liquidity.If your strategy works bestand you're coming out green by always removing liquidity,then stick with that.But I'm saying this does exist in the market.And this is exactly how,when I'm making a bunch of trades on my live trade videos,where the fees aren't just totally eating my lunchor anything like that,because I'm using the proper brokerand then I'm also adding liquidity to the situationwhich is as you just saw,hey, is leading me to some savingsand I'll definitely take a 33% return on my commissions,because that was an extra 376 bucks in my pocket.I can think of a lot of things to do with an extra 376.So hopefully this helps and you're aware of it.But like I said, check out the link belowif you're watching this on the site itself.I guess if you're watching this on YouTubewe'll put in the description box.But you'll see in that situationI literally actually came out ahead,which is pretty interestingand I think blows a lot of people's minds.But that also will go over how to add and remove liquidityand what all that means.Hopefully I've opened your mind a little bitif you were not aware of all this.If you're out there trading alone currentlyand maybe are in the market looking for a community to jointo assist you in your trading,or to just help you, give you another set of eyeballs.Then I do have a private trading communitywhere you can trade alongside meand other experienced traders.So what you see popping up on the screen right nowis both an information link,so if you click on the Inner Circle one,that is gonna take you to the pagewhere I explain all the detailsof what exactly come with the community,both the chat room and the newsletter.And then the other image that has popped upis a behind the scenes tour where you can see exactlywhat is going to be contained within the community.I take you through, like I said,a behind the scenes tour of everythingand that way you'll know preciselywhat you are getting when you join.Definitely check that stuff out if you are interestedand thinking about wanting to join a community.And let me know if you have any questions.

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