The most frequently asked (and easily answered) questions are below. See also my Q&A Index for my video Q&A and try searching my blog using the search box in the upper-right corner.
Q: Your blog is awesome! Do you have anything to sell?
A: I do not offer any pay services. I will occasionally use Twitter (I am @GoodeTrades on Twitter) to alert my trades in real time. If you wish to support this site, I suggest using my affiliate link to buy Tim Grittani’s Trading Tickers DVD.
Q: What brokers do you use?
A: My main broker is Interactive Brokers (often shortened to IB or its ticker IBKR). The software I use at IB (what you see on all my trade recaps) is Traders Workstation or TWS. 70% of my trades are with Interactive Brokers. Their platform is great, their commissions are cheap, and fills on trades are fast. Furthermore, IB allows me to short more stocks that I want to short than any other broker, including penny stocks and OTC BB and Pink Sheet stocks. My only complaint is that Interactive Brokers has horrid customer service. My second broker is Centerpoint Securities and they are by far the best broker for shorting stocks although they have high fees. I have a small account at Etrade that I have not yet used.
Q: How much does Interactive Brokers cost?
A: Commissions are $0.005 per share. Data fees are separate. If you pay over $30 per month in commissions the fees for level 1 data feeds are waved. Otherwise that is $10 a month. I pay $2.50 per month for Pink Sheets level 1. I recommend paying $15 per month for Nasdaq Totalview, but I have Level2 through other brokers so I do not subscribe to that.
Q: But isn’t that costly to pay per share commissions? Why not use a broker that allows per-trade commissions?
A: While I pay much more in commissions on large orders than those with per-trade commission structures (such as $10 per trade at Thinkorswim), it is still cheaper for me to use a per-share commission structure, because along with that I get direct market access. Almost all brokers that have a flat-fee commission do not grant the trader direct market access. So that trade for 10,000 shares will first be matched with other orders at the broker and then be sent to the market. This means that execution will be slower. For a fast-moving stock, a delay of even a second or two can result in the stock moving a few cents. So that cheap commission may cost you a lot more than you think. Furthermore, Interactive brokers has all sorts of complex order types that other brokers do not, such as iceberg orders (the ability to hide the size of a trade), discretionary orders, and IB has a great record of getting very good, quick fills. Simply put, I would be a much worse trader with any broker other than IB.
Q: How do you scan for pre-market gainers (stocks up in pre-market trading) at Interactive Brokers?
A: See my video post on that.
Q: What is your trading setup like?
A: You can see pictures and a description of my trading computer on this post. I have IB’s TWS and booktrader up on my middle-right monitor (with Sterling Trader minimized); the Scottrade Market Movers (hod list), quote box, linked chart (1-minute or 5-minute candlesticks); two browser windows and my third brokerage’s program on my middle-left monitor; and a browser window with my email open, the TimAlerts chat, Tweetdeck, and time and sales for Interactive Brokers on my left-most monitor. Due to the high resolution of my main monitors I use Malgun Gothic 18 point font for IB TWS.
Q: Where do you scan for stocks?
A: I use Stockfetcher.com. It is only $25 per quarter and is invaluable because it is so easy to customize scans for whatever you might be searching. I wrote a post on my favorite StockFetcher scan, Scanning for Supernovae.
Q: How do we know that you aren’t making up your trades?
A: Almost all my trades are verified on Profit.ly; I post all my trades there (although at any one time I may not be up to date in my posted trades).
Q: For what stocks or volume level do you use market orders, and when do you use limit orders?
A: 95% of the time I use limit orders. If I really want a fill I will set my limit such that even if the stock moves away from me I will get filled. For example, if I want to short XXXX when it breaks $4 and it is up from $1 in two days, I will likely put my limit at $3.93 and wait until XXXX breaks below $4 and right when it does that I will send my order. That ensures that 95% of the time I will get filled; if it drops too rapidly I won’t get filled but I wouldn’t want such a bad execution anyway. On fast-moving liquid stocks where my order is not even enough to exhaust the NBBO I might use a market order. For example, I almost always use market orders when trading my “pre-leader longs” strategy.
Q: What do you mean by an illiquid stock versus a liquid stock?
A: Two factors matter for liquidity: the spread between bid and ask and the volume. A stock such as GE will have a tiny spread: as I write this it is 14.23 x 14.24. A good example of a fairly illiquid stock is OHB, which now has a spread of 4.95 x 5.15. The spread is a cost you pay: if you want to buy immediately you have to buy at the ask and if you then go and sell at the offer you have already lost 3.9% of your investment without the stock moving! Generally if the bid/ask spread is more than 1% or 2% of the price I consider a stock illiquid. As to volume, stocks with under 200,000 shares per day I would consider illiquid, with over 1 million shares per day tending to make for liquid stocks. Going back to our example stocks, GE is trading over a billion shares a day recently. OHB will trade about 400,000 shares. This brings me to a last point: the spread on a stock will be smaller and it be more liquid if it is not moving. A stock that has moved a lot quickly will have a wider spread and it will be harder to trade it. A general rule of thumb for trades of a few hours to a couple days is to make sure your position is less than 1% of a stock’s daily volume.
Q: You sometimes talk about a stock breaking out on high volume or falling on fading volume. What do you mean by that?
A: What matters in these cases (momentum stocks) is not the actual volume but the volume relative to the stock’s average volume. If a stock breaks out to new highs on volume that is over twice its normal volume that is usually indicative that the stock will go higher (see this chart of GGC for example). Conversely, if a stock is up big and its daily volume starts fading it may fall as all the momentum buyers will sell the stock.
Q: What software do you use to do your screencasts?
A: I used to use Jing Pro. It costs $15 per year and limits videos to 5 minutes in length, but it makes screencasting and uploading to Youtube easy. Jing Pro no longer exists and I use SnagIt.
Q: What software do you use to track your trades?
A: I track every single trade in an Excel workbook. For tax purposes I use Tradelog MTM.
Q: What is this duck that you and your blog readers sometimes refer to?
A: It is a metaphorical gift to anyone who shows insight and makes a great comment or great trade. The duck does not actually exist. Anyone who earns five ducks within a week can exercise their duck option and I will send them a rubber duck as a trophy. Reaper and the blog regulars all have the ability to confer ducks onto blog commentators. To receive the duck is a great honor.
Q: Why won’t you friend me on Facebook?
A: Nothing personal. I do not friend people unless I have met them personally and talked with them for some time. One never knows what kind of crazy people may find me online. I am still eager to chat and welcome comments on this blog and emails (as long as those do not request personalized stock advice).
Definitions
ALFSS – Aliens land far from school. Hmm, or maybe Always Look For Shares to Short. I stole this from Tim Sykes. I’ll say this on stocks with big run charts. ALFSS does not mean short with wild abandon. It means prepare to short, get your hands on shares to short, but wait until there is perfect price action before shorting.
ADR – This is the average daily range (usually over the last 10 or 30 trading days). The daily range is the high minus the low of a stock, and the ADR just takes a multi-day average. Stocks with high ADRs tend to move a lot.
Green/red (or going red on the day, going green, red/green) — This indicates that a stock is going above or below its prior day’s close. So if a stock goes green today it has just gone above yesterday’s close. If it has just gone red it has gone below yesterday’s close. Whether a stock is up or down for the day has a significant psychological influence and it can inspire fear or greed. This is most true with penny stocks which are usually traded by unsophisticated individual investors.
Penny stocks — Small-capitalization stocks trading for under $10 per share, usually under $5, that are highly speculative. Most of the penny stocks I trade are listed on the Nasdaq, although some distressed companies listed on the NYSE can trade like penny stocks.
Supernova — A penny stock that has increased by over 100% in a couple days. See my post on on how to scan for Supernovae using Stockfetcher.com. Tim Sykes originated the term supernova.
Stock Promoter (also Stock Pumper) — These people are scum. They are paid by a small company (invariably listed on the Pink Sheets or OTC BB) or its shareholders to get people to buy the stock to push it up. If you buy when they say to buy you will lose money. Sometimes the stocks they pump can be great shorts (see my article on my ALAN trade for an example). There are many stock promoters. The most famous are Beacon Equity (which also owns StockPreacher) and Jonathan Lebed.
If you have a question, enter it as a comment. Try to keep it to general questions. Other questions feel free to ask on my blog posts. After I answer your question above I will delete your question from the comments to make room for more.
You are a great teacher. I would suggest you write a book. make it an ebook if you like on your learnings and strategies. I will buy it for sure.
God bless and good luck
JDV
How expensive are IB’s shares when shorting 30,000 shares though? I read on a blog that IB will charge you only 0.2% of the total dollar trade amount on a Pink/OTC stock, or would it be $150 each way? that would be rediculous to spend $300 on a trade… thanks dude.
I just answered that Q in my Q&A video #2 today.
I currently use ETRADE. In your opinion. Would It be better to switch to Speedtrader or Interactive Brokers? If so, what is the minimum to open a margin account?
I think I make abundantly clear my favorite broker. It depends on how you trade and what you trade, though.
Thanks. Learned a lot. Your good!!!
Reaper, there is some great info here. Still struggling a bit with the IB platform…uuugh, teaching an old dog new tricks can be tough, but I’ll get, and besides I am not that old…Don’t want any more LEXG/REDF mishaps.
I really recommend IB’s (free) webinars. Google it. They have them every month and have past ones archived.
Thanks Reaper. Pretty much feeling better about how this thing works now (I still think it’s a menu labyrinth of epic proportions). I would still like to set up some watchlist tabs,etc below the main icons similar to the way you have them. I’ll surf thru the Webinars and see what I can find.
though u were me friend
Huh?
Are your videos captioned/subtitled for the deaf/hearing-impaired?
No and I do not know how to do that.
Is opening an off-shore trading account like Sure Trader perfectly legal for U.S. Citizens?
Yes it is 100% legal (although I’m not a lawyer). But there are very strict reporting requirements: http://www.goodetrades.com/2012/01/some-important-advice-for-those-who-use-offshore-brokers-like-suretrader/
Hi Michael,
do you have the web or desktop version of browser based or stand alone TWS? Thank you!
I use the web-based. They are the same, just one downloads each time and the other is installed locally. I find the web-based to be simpler to install/upgrade.
Thank you, Michael. I am using their demo account first to get myself familiarize with their interface before I fund my account. Great blog you got here!
Hi Micheal, I have few questions about Speed Trader Pro. Here’s the breakdown of their charges:
Speed Trader Pro $49, which contains level 1 data for major exchanges.
Level 2 access is $40
Regional quotes is $15
OTC and pink sheets level 2 data is $30
Nasaq Total View is 20
Q1: I don’t see why I need Nasdaq Total view and regional quotes if I have level 2 Access and OTC and pink sheets level 2 data? Have you traded any stocks that belong to a regional exchange?
BTW, they told me that level 2 pink sheet/OTC data also contains level 1 data as well, if that’s the case, I’m curious why you would need to pay for the level 1 pink sheet and OTC data with Interactive Brokers?
Here’s their fee structure: 0.0039 per share with min $0.99 per order or $6.95 per trade.
So If I’m going to get level 2 access ($40) + level 2 pink sheets data ($30) + $ 49 (software), that’s total of $119. This means I will need to generate a commission of $119 or greater for the fees to be waived.
Unfortunately, unlike Interactive Brokers, their commission structure is not that flexible.
IB offers 0.005 per share or 0.5% max per order, which ever offers the lower commission.
With Speed Trader
If I choose 6.95 per trade, that means I would need to roughly make 20 trades or 10 (buys and sells) for month for my fees to be waived,
Or
If I choose the 0.0039 per share basis, and let’s say I buy and sell 1000 shares, that would be $7.80 per trade or roughly 15 trades per month or 8 (buy and sells)
I’m assuming you chose the per share basis since you’re an avid trader, but since I’m a newbie trader, I don’t know if I will trade enough for my fees to be waived. Which fee structure and data feed would you recommend me to get if I want to trade penny stocks and mid/large caps?
Thank you so much for your help
Wendy, I get Level 2 with regional quotes, pinksheet level 2, and nasdaq totalview. I think it comes to $140 per month but I never pay that because my commissions are always higher. I think I did $10k in commissions there last year and about the same amount at IB. I have the per trade commission schedule at Speedtrader, but because I do good volume I pay under $7 per trade; even at the $7 per trade if you do cheaper stocks or a large number of shares it is cheaper to do per trade. And $7 per trade is still cheap. If you ever trade stocks under $0.50 per share it is better to to per trade commissions than per share.
Of course, in the end it all comes down to making money. If I pay $100k in commissions but have $100k in profit after commissions, I’m happy. If I pay $100 in commissions but the broker doesn’t have the right tools for me to trade and I make only $3k, then I am unhappy. So choose the broker that has the proper tools to do the trading you want to do and only then worry about commissions. For people looking to short pumps, that means IB is best, and for people looking to buy them, Speedtrader is best. If you will trade mostly list stocks (not otcbb/pinks) then Speedtrader is inferior to IB.
Michael,
I am also curious about this question from Wendy that you missed. She asked:
“I don’t see why I need Nasdaq Total view and regional quotes if I have level 2 Access and OTC and pink sheets level 2 data? Have you traded any stocks that belong to a regional exchange?”
Also, I am more so curious to know why data providers make it a requisite to purchase Nasdaq Total view and regional quotes with PinkSheet Level 2. I just want to trade OTC penny stocks.
Thanks,
Boe
Just got a response from Kinetick:
The Market Depth servce for $20/month is our base fee for adding market depth data to your account. This service would be required to receive Level 2 data for any of our supported exchange.
The NASDAQ handles the delivery of Level 2 data for the OTC Markets as well as the NYSE and AMEX. This is why you will also need to add the NASDAQ Level 1 ($6) and NASDAQ OpenView ($19) to your subscription to receive Level 2 data for the OTC Markets.
Hi Michael,
I’m planning to follow your footsteps: use IB to short penny stocks and long on midsize/large caps, and Speed Trader to long on penny stocks.
You’re absolutely right. Plus, I was also being short sighted and worried about not making enough trades to cover the cost of commission, software, and subscription fees, that I forgot that my focus should be making quality trades not quantity of trades. I mean I can sit in front of my computer all day making trades but losing money on all my trades, or I can make one quality trade (or more) which will generate enough profit to cover the cost of the all the fees.
One more question: Does level 2 with regional quotes have the same data as nasdaq totalview? What’s the difference between the two?
Thanks again for your help,
Wendy
Wendy — Nasdaq totalview gives you full depth of bid/ask on the Nasdaq exchange. Regional exchanges gives you quotes from regional exchanges like Cincinatti, Philadelphia, Boston. So basically it just gives you a more complete level 2 view.
Thank you!
Hi Michael,
You suggested to watch TimFundamentals Part Deux to learn how to research for pennystocks. In the DVD, Tim was still using ClearStation.com as one of his tools to do his research. What is he using now (Finviz?) and do you know the filters he’s using to look for the pennystocks?
Thanks,
Wendy
I assume Tim just uses Yahoo Finance % Gainers scan. I pay for and use Stockfetcher.com ($25/quarter). If you search this blog for “stockfetcher” you will see a couple of the scans I run on it.
got it! Thank you!. Another question: do you ever execute and/or track orders via TWS DDE for Excel API? How about automate some of the trading tasks or researching stocks via EXCEL macros?
Wendy – I have done that in the past but do not do it now.
is there a way to find out the holders of large short positions in a particular stock e.g. SPPI which 50%+ of the float is shorted? Is this potentially indicative of a shark attack – drive down the price for a low ball offer?
No. Unlike longs, large shorts don’t have to file form 13 when they have greater than 5% of the stock. I am sure though that it is just a variety of different funds short a stock like SPPI — having a huge short position is just asking to get squeezed.
Even with their Standard or Advanced packages, StockFetcher is still a (15 min) delayed screener, right?
Can you recommend a real time stock screener?
If you want the works, Equityfeed, although it is expensive. Interactive Brokers has various stock screening abilities that I use.
Hi Michael,
I’ve been reading your blog posts for a couple of months now, this is very valuable information you have here. I believe you should create your own trading related information DVD’s just like Tim did, I’m pretty sure it would be a total success. Changing the subject I wanted to ask you about stop losses and how useful they are while day-trading penny stocks.
For example I’ve heard that stop losses sometimes are not executed due to gaps and that could make you a huge loss. Can you please advice me a little bit on this subject?
How useful can stop losses in pump and dumps, and illiquid stocks be?
Regards from México.
With otcbb stocks stop losses are not very useful because when a stock panics it is very hard for anyone to get a fill, even with a market order. I would never recommend holding a position in an otc stock unless you can watch it at all times.
Hi Michael,
I’m not a US citizen, can I still do OTCBB trading ?
My country (Singapore) don’t offer any trading for (Short), currently I got introduced to this online trading company (SAXO Capital).
I have notice that SAXO Capital is not under any of Tim Sykes website brokerage list.
How am I suppose to fit into the transparency terms and conditions ?
Please help me out Michael, do I still stand a chance to join Profit.ly’s Alert and not get removed or terminated from my user ID ? As I’m really hungry to pay off my University bills.
Cheers
Best Regards,
Alex Goh
I am not familiar with Saxo. Yes, non-US residents can trade penny stocks. My recommended broker, Interactive Brokers, may or may not be available to you. Suretrader, based in the Bahamas, should be available to you. I highly recommend against trading penny stocks to try to make money to pay off debt — trading is risky and plenty of people lose money.
Hi Alex
did you end up opening an account with “SAXO ” ? lets talk email me Agronovsimon@gmail.com
thanks
What do you think of IB’s new “Probability Lab” for options?
Unfortunately I am so far behind on everything that I have not had time to try it and will not have time to do so for the foreseeable future.
Good day Mr GOODE… I have just retired, and I plan on taking on my passion of daytrading…
My question is, IYO Should I start up a llc, to trade thru? I have liquidated most all assets so not much risk
of personal property… But is tax advantages worth the hassle of a llc…
I respect your opinion and am aware it is only your opinion…
THANK YOU FOR YOUR TIME ( in advance )… Respectfully GWPTRADES… @waynster_
The tax advantages of an entity are not very large and you don’t get them unless you qualify for trader tax status. I don’t trade in an entity. See this book for a good discussion of tax laws for traders: http://www.amazon.com/exec/obidos/ASIN/0071441395/reapertrades-20 — that book was written by the founder of the CPA firm I use.
LOL… I wouldn’t exactly call your current balances being so far behind.
Great trading, i don’t know how you manage to trade at the pace you do.
Ha! That is what I meant — so busy trading that I don’t have time to do research or surf the web or read the paper. I don’t think I’ve had one slow week over the last year.
LOL….. Well like they say, “Make hay while the sun shines”
And Congratulations on a job well done.
Question on cost,
I am buying 10000 FOX stocks at say $32, will cost trader $9.99 at ameritrade, $5 at Scotstrade or $2 at Fidality, and it will cost me $50 at IB. Why would someone pay higher fees?
Also in case of hedge funds who trades say, Alcoa 100,000 or 1,000,000 stocks, it will cost $500 to $3500 at IB vs fixed cost brokers, why would some one who has high volume prefer IB?
Hedge funds don’t use discount brokers. High-volume traders tend not to use discount brokers. Fills matter a lot more than commission (at least for higher-priced stocks). If I pay .005 per share in commissions but using IB allows me to get filled at an average price .006 better than a discount broker than I am saving money.
Hi Michael
Wondering if you know any Australians trading Tim’s system and if so what broker they are using.
I know Tim recommends suretrader but dealing with them is like hitting your head with a hammer violently.
A lot of the other brokers he recommends wont deal with Australians like TOS and IB.
Regards
Mark
I do not know.
Hi Michael.
Do you find it helpful to have the regional level 2 and ARCA/NYSE level 2 with Das Pro? Don’t most folks just use NASDAQ totalview with Das which shows everything anyways no?. I wasn’t sure if the extra $15 per regional and $15 per ACRA/NYSE level 2 add on’s were of any use or even how to use them on the montage. Hope you can clarify for me 🙂
On a side note I noticed DasTrader.com has a subscription now to link IB with the trading platform pretty cool.
I just use regional quotes and not Nasdaq totalview. I think. With Speedtrader it is free as long as I do over $500 in commissions each month (which I do) so more is better.
Thank you looking at your level 2 though it shows you have Nasdaq totalview i.e.; Inet and I see the Arca/Nyse tabs too.
What are your thoughts on Speedtrader after being with them for some time? I hear they use COR clearing now but have ETC coming on very soon. Was thinking this might be a great back account for larger orders.
Correct but I don’t see those tabs in my Speedtrader Pro anymore. I no longer recommend Speedtrader. I am currently trying out a new broker, Regal Securities.
Thank you! Can you elaborate why you don’t recommend them? I was getting ready to open an account mostly because they have Das Pro and a low flat rate. Eager to hear your thoughts.
I use Speed because they have good OTC routes (direct routing to various market makers) but they have lost all their good routes.
Ahh ok. ETC is in processing so most of those routes will be back soon. I agree though with COR they are not OTC friendly but great for Nasdaq and other majors.
Hey Mike,
I’m with IB but having difficulty with OTC and Pink sheets. Went into account management to allow access but no available?
Any idea where I submit to allow access in IB?
Any info would be great, IB is closed until Sunday and I’m desperate to get into ECDB.
You need to go to your trading settings to enable trading of US OTC stocks and you need to subscribe to OTCMarkets Level 1 data.
Mike–
I’m quite impressed how well you do at responding to these comments with how busy you are…nice work.
I saw in a video you did with Tim that you attended Graduate School and that is what made me want to direct my e-mail to you. I am currently in grad school obtaining my MBA and am quite busy. Also, I don’t have a lot of disposable income to my name. However, I’m very eager to learn and trade as much as possible as I finish up. I wanted to get your opinion on what would be the most advantageous use of my minimal funds and time.
I have thought about doing the $50/month “Tim Alerts” in order to receive real-time alerts, chat-room access, etc, but I am worried that it would do nothing for me without having watched his plethora of online videos available with the $100/month package (which I am not totally confident I have the money for…without really pissing off my wife).
Any thoughts on what could be the best use of my time and resources for the next year of my schooling as I strive to dive deeper into this art?
(My personal experience so far is that I have been trading with Options House since 2009 and gone from $9,000-$22,000, but would like to start expanding my abilities).
Thank you for the help– if responding via e-mail is better, feel free to shoot me an e-mail. Looking forward to the response.
Best Regards,
Michael (as well..)
Michael — Pennystocking Silver is better because of access to the videos. You could always subscribe to PS Silver and then try to watch all the videos you can in one month and then go to Timalerts.
Mike–
Good call, I have a little bit more free time this summer. I’ll aim to sign-up from June-August and then scale it back.
Still quite impressed with the quickness of your response.
Best Regards,
Michael
If your money is precious to you then don’t spend it on anything that has Tim Sykes name next to it. Tim will end up going down like Madoff.
And why would that be?
Hi Michael,
I am a newbie in investing, even though my educational background is in finance and i do have general knowledge of stock market fundamentals and functioning.
I’m eager to learn investing in penny stocks and have been reading your website for some time. I have also read books/articles available on internet about penny stocks (Peter Leeds, etc).
From what I understand, most of the gains that you and other successful traders showcasing on profit.ly, are from short selling penny stocks. I understand short selling is not for beginners, so I wonder if you can recommend a learning guide for investing long in penny stocks. Are there any useful materials among Tim’s products portfolio that would help me to learn successful strategies for investing long in penny stocks?
Thanks in advance for your advice!
Kind regards,
Elchin
You should never invest in penny stocks. If you want to invest, stick to real companies. Most penny stocks (or at least most OTC companies) are scams, insider enrichment schemes, pure frauds, or just bad businesses. Of course they can still be good buys sometimes, but never for the long term.
Michael,
Thanks a lot for your prompt reply.
I’m not a native speaker, so I apologize if my previous post was confusing. I didn’t mean long-term investing in penny stocks, rather holding long positions in those penny stocks which have potential to increase significantly in price in the shorter term (say, few weeks or few months).
Let me give an example of my situation: I have a small account ($2000) which I decided to split between few long positions. So, in March I opened account with a local broker and put few hundreds dollars in MCZ, which is a penny stock traded on NYSE MKT and is specializing in gaming accessories. Since I bought MCZ shares they rose from 0.47$ to over 0.70$ (+50%) in just one month, whereas the three other non-penny stock companies which I invested in (PVA, PACB and SIRI) were either down or stayed roughly at the same level…
So my question is if it is possible to identify and select those penny stocks which are real companies and are traded on major stock exchanges that could yield good returns in the short term?
I see Tim Sykes making good profits in May on real penny stock companies like QUIK and IDN which spiked +25% in just few days, so I wonder whether he has alert service specifically for spotting those penny stocks which have upside potential in the short term?
Also, would you please recommend a cheap discount broker for a small account like me, as my local broker is just not suitable for trading with small money (they charge 15$ per trade).
Many thanks for your help
Regards,
Elchin
Elchin — For such swing trades long penny stocks I suggest sticking to only those stocks that are Nasdaq or NYSE Market listed and avoiding OTCBB / Pinksheets stocks. But I don’t make those kinds of trades so I can’t really offer much other advice.
I just recently stumbled upon your formula and am about to open an IB account, however, I would like it if you could help me decide between the “Fixed” and “Tiered” account options.
It would seem that the Tiered option would work best for me. I don’t imagine that I would want to buy more than 1000 shares at a time. .005 vs .0035 plus a nominal fee.
I noticed you went with the fixed option, and I just wanted to inquire on your thinking with regards to that decision. Is there any advantage to the fixed option?
Thanks!
CL
Unless you almost always remove liquidity (buy at the offer and sell at the bid) the cost plus commissions will end up being cheaper. I changed over to cost plus maybe a year or so ago.
Thank you for confirming and for pointing that out.
I’ve sat out of the market for the last 10 years and am just now recovering enough financially to get back in. Can you direct me to a good source to get Level 2 data feeds for cheap or possibly free?
well Nasdaq totalview is only $15 per month at IB. You could open an account at TDA and not fund it and their Thinkorswim platform should still work with level 2.
I’m an Australian who is trying to start options trading again after being out since the GFC. It was difficult to find a broker who didn’t insist on you having a margin account to trade diagonal spreads. After extensive research I found Halifax Investment Services based in Qld, who use IB and do not require USD10,000 minimum account. I’m still paper trading while I find my way around TWS.
Hi Fay,
I’m in Australia too, and was wondering about the difference between opening a TWS account directly with IB, or via Halifax, which I’m assuming has an arrangement with IB on the TWS. Do you (or others) have any thoughts?
Cheers
John
Hi Micheal,
I haven’t decided which broker to go with. I need your help. I am a new trader and I would like to start with about $1,000 to $2,000. Not less than that.
Please can you recommend me a broker to build my account.
Best Regards
With that little money your best bet is Suretrader.
Hi Michael,
Just getting started and been doing some research for the past few weeks. I’m trying to trade a grey stock on ThinkOrSwim, and the order is not getting filled. Does this have something to do with the lack of bid/ask price, availability, or broker routing? Any info would be great. Also, I’m not ready for IB yet, but would another broker be able to fill the order? Thanks for your feedback.
IB won’t even let people trade grey market stocks. Without seeing the stock trade I cannot tell why you aren’t getting filled but fills are really, really slow on grey market stocks. I strongly urge people not to trade them.
Q: For what stocks or volume level do you use market orders, and when do you use limit orders?
A: 95% of the time I use limit orders. If I really want a fill I will set my limit such that even if the stock moves away from me I will get filled. For example, if I want to short XXXX when it breaks $4 and it is up from $1 in two days, I will likely put my limit at $3.93 and wait until XXXX breaks below $3 and right when it does that I will send my order.
Hi Michael, you did mean break below $4 right ?
Cheers
Yes I did mean $4 instead of $3. I have corrected that.
Hey Michael – When you sell a stock OR buy to cover, do you generally do this “all or nothing” trade? Do you just sell OR buy to cover only some of the shares? What is your recommendation? I am curious if this affects trade execution as well. Looking forward to your response. Have a great weekend!
I never use all or nothing (or fill or kill) orders. In almost every situation I would rather get a partial fill than no fill. And AON and FOK orders are granted lower priority I think than standard limit orders.
Thanks Michael, much appreciated.
You do get charged commission for each partial fill, correct? Which if true, I am assuming is better than not getting filled at all or really late, right?
What are your thoughts on Speedtrader vs. Regal Securties (myprotrade.com) for buying early on pumps?
Scott — First, there are essentially no pumps worth buying any more, so don’t choose a broker based on that. Speedtrader is halfway decent on OTC stocks although I imagine that Regal is superior (I opened an account there but never traded as too few OTC stocks have been worth buying). And yes you do get charged commissions on partial fills. But if I submit one order and it is filled partially at three different times I still only pay one commission.
Thank you, that makes sense. Would you say learning how to short these pumps is a better way to go right now? Aside from Centerpoint, because I do not have enough $$ to open an account, would you say IB is the way to go?
Scott — Well, shorting is good, but borrows have been horrible really all year on pure pumps. I was able to short 3k VOIL today at IB but it wasn’t shortable at IB for weeks prior to today and today was only shortable for 30 seconds or so. I think it best to focus on shorting Nasdaq supernovae.
Gotcha. Ok I appreciate your feedback. Any thoughts on Suretrader? I was thinking of opening an account with them and IB. I have about 10k that I am willing to start with. I know Suretrader gets me around the PDT rule, but have heard fees are unreasonable, poor executions, and sometimes its difficult to get money out. Have you had any experience with Suretrader?
Scott — I have no personal experience with Suretrader. But everything I have heard about them supports what you say — high fees, horrid customer service, etc. Although I would strongly consider opening a Suretrader account anyway to get around the PDT rule if I had under $25k.
Michael, thank you! I’m saving up for a small investment ($2500) to start trading and, eventually, join in on the Sykes method(s). Because I’ve been paying attention I’ve gained a solid record in trading on paper. I’m continually trying to cut myself difficulty based upon real experience I’ve yet to understand. At present I am matching my husband’s income on an average of $500 a week. It seems too easy. I must be missing something. But Tim’s method is certainly consistent.
Upon your suggestion suretrader would be best and I see they have all these various fees on things which I don’t yet fully understand. I’m a quick study and will get to these soon.. Would you mind providing a ball park percentage deduction based upon commissions, hidden fees, unexpected spread costs and anything else I don’t know (aside from the occasional losing trade)? For example, I didn’t realize there would be things such as a surcharge on profitable trades of small amounts. I’m just looking for a rough percentage right now. What’s realistic? 10%? 7%? When I sign on I’ll be sure to read all the fine print and ask questions directly to the broker .. yada yada.
How long do you recommend someone paper trading before going live?
THANKS
Bonnie — The one problem with paper trading is that it does not involve your emotions. It is a lot easier than trading with real money. So to really learn to trade you have to trade with real money. Of course there is no point needlessly losing money so I always tell people to start trading with very small position sizes until they become consistently profitable.
For Suretrader your main fees are the commissions, ECN fees (estimate .03 per share), and then data / platform fees ($150 per month if you get Suretrader Pro with regional quotes and Pinksheets (OTCMarkets) level 2).
Words cannot express my gratitude sufficiently, but it’s yours. I wish you continual success!
Hello,
I am also wondering which option to choose when opening an account at Interactive Brokers.
Fixed or Tiered pricing?
My strategy is based on swing trading so I would keep stocks overnight and I saw that this represents extra costs in tiered pricing.
What is your proposal MG?
Cheers
Tiered is better unless you always remove liquidity (buy on offer or sell on the bid). Holding stocks o/n should not increase commission costs and obviously you shouldn’t be using margin
Michael,
Thanks so much for being so generous with your knowledge. I have been looking for resources to understand more about routes of execution and market makers. I see where the top traders value having a choice of execution routes for making trades but I am not understanding why they would choose one over the other and how to get familiar with individual names that show up on level 2.
Thanks again.
Hi Michael, I found your site looking for “Interactive Broker + Penny Stocks” I want to make two brief questions.
(Sorry for my English. And thank you very much for your help.)
I live in Argentina and I will open an account at Interactive Broker with $ 10,000.
Overall, my operations will be:
30% ordinary shares (invest upwards)
Penny Stocks 70% (Short sell)
My questions:
1) What type of account need, FASTTRACK or PROTRACK?
(https://www.interactivebrokers.com/en/index.php?f=1591)
2) What kind of commission suits me for what I do, FIXED or TIERED?
(https://www.interactivebrokers.com/en/index.php?f=1590)
Thank you very much.
Mart.
Hey Michael I am hoping you will help/advice me on whom to open an account with, I am new and doing as much research and education as I can, I only have $2k to start with and I am wanting to trade Penny Stocks. While reading I have read a few different brokerages and was wondering your advice? Thank You!
Etrade is the best place for those starting with a small account IMO.
Hi Michael
I’m a non US resident and totally new to trading penny stocks. I’m familiar with forex trading tho.
Can you recommend a broker that allows you to demo/paper trade and also one that allows for small accounts ($1000)
Any other advice for a newbie on how to get started?
I look forward to going thru the rest of your site
Thanks
JD
If all you have is $1,000 I’d suggest getting more money before trading. The offshore brokers all have high fees and I don’t know them well enough to recommend any. Look into Tradezero.co and Alliancetrader.com. My favorite broker for non-Americans is Interactive Brokers but their account minimum is $10,000.
hi michael, im in a similar position and am becoming frustrated the more i look into setting up an IB account as it seems some rules contradict others, i.e the $10,000 minimum but then theres a 3k minimum for those under 23 i believe, which i fall into , but then theres other rules that override that, it just feels like a rabbit hole with an overwhelming amount of rules that i have to jump from page to page to grasp, and i feel apprehensive to open an account and “hope its the account i expected” just wondered if you have any advice on this or if I’m overcomplicating things, thanks
I think you are overcomplicating things. You either qualify or not. If not, you could always open an Etrade account. But I do strongly recommend IB.
Well, you cannoit daytrade stocks in US unless to have 25k$ on your account.
Yes you can. You are just limited to 3 day-trades every 5 business days (the pattern day-trader rule). You can only make more frequent day-trades if you have over $25,000 in your account.
thank you and i agree, its just quite daunting as a newbie, would you still recommend IB to a UK citizen as thats currently where i am or are there better options here? appreciate your time by the way 🙂
Yes I would recommend IB to anyone able to open an account.
Hi Michael –
I’m a noob and signed up for Tim’s Silver subscription, currently working on setting up a broker and trading platform. Support team @ Profit.ly and others have told me Centerpoint is the best option for $30k + account but I’ve read elsewhere they have high fee’s for cheap or sub-priced penny stocks and suggest using another. I plan to focus on long trades since shorts I don’t feel as comfortable with yet. I see you’re a big fan of IB – what’s your advice for my situation?
Thanks!
Luke
If you are at all concerned about fees then IB is the better choice. Centerpoint’s best feature is being able to short lots of different stocks. IB has per share commissions just like Centerpoint but the maximum commission is capped at 0.5% of trade value so you can trade low-priced stocks there (although a per-trade commission broker would be ideal). IB’s executions are the best in the business.
Above you state that you use stockfetcher.com for stock screening, are there sites or platforms that you use for screening for breaking news based on multiple customization criteria?
Yes but at the moment I can’t recommend anything. I am in the process of changing what I use. I’ll do a post on it in about a month.