a question for you "active gold traders"

MoneyLA

This question is for the "active gold traders," those who buy and sell gold frequently and are motivated to buy or sell based on price swings in the range of $10 (ten dollars) to $20 (twenty dollars):

What is the out of pocket cost for a trade involving a $20 price swing in gold?

For example, given a price of $930 -- if gold should rise by $20 that would be a percentage gain of about 2.1%. What was the cost of this trade -- on a percentage basis?

Many thanks.

cohodk

I trade DGP on the long side and DZZ on the short. On May 21 gold had about a $20 swing from high to low. DGP had a range from 20.27 to 21.08 or 4%. If I place at trade with Fidelity it costs $8 So if I traded 1000 shares for a $20,278 initial investment and sold for $21,072 my net would have been $794 or 3.91%

RedTiger

I am not a day-trader so am not in that camp. However, for a person trading the GLD ETF (exchange traded fund) the commission is the standard stock commission which will vary by firm. At my broker, ThinkorSwim, it would be $5 for a 100 share lot. So on $9500 value the commission is $10 to get in and out. If there is a $2 move on the $95 ETF, the theoretical profit on 100 shares would be $190 ($200 - $10). Other brokers are higher ($8 to $12 each way is common), a few brokers are lower ($1 each trade for extremely active traders).

Perhaps one of the very few futures traders on the forum can add their comments and their commission schedules. Most futures traders use margin so the math can be quite different. A six percent move in futures can double your money, if trading on full margin (it can also mean a 100% loss).

roadrunner

I only place trades with stocks, no options or futures, at least not yet.

My IRA brokerage account at T. Rowe Price is $12.95 per trade for 1000 shares, regardless of the cost per share. So figure $26 on a tround trip commission. For a $2500 trade you're looking at 1%. For a $10,000 trade, 0.25%. They get you for .02c per share for anything over 1000 shares. So if you are thinking of doing a 2000 share trade, it's cheaper to buy/sell in 1000 share increments. If you don't do at least 30 trades per year, they get $19.95/trade.

My USAA (non-IRA) brokerage account gives me $5.95 per trade. It used to be double that but for some reason they have effectively halved it...and I didn't argue or even care to ask why. It could be that I've been an insurance member with them for decades. This lower commission comes in handy for stocks in the $1-$5 range where a larger commish would eat you up somewhat. And there is no extra fee beyond 1000 shares. So If I had 5000 shares of a $2 stock. That trade is only $30...while at TRPrice it would be at $92.95. So at USAA I can make a quick single move with a cheaper stock.

Regardless of whether it's $6 or $13 for my trade, if I'm making a $1000-$10,000+ trade that commission pales in comparison to the timing in the buy/sell which is often on the order of minutes or even seconds.

With your example of gold increasing approx 2%, a 2X leveraged gold bullion ETF would likely see a 4% gain, or close to it. Gold stocks would also tend to see 2X that gold bullion move. If you're doing a $10,000 trade that goes up $400, the net gain is $375-$388 depending on my brokerages.

roadrunner

KentuckyJ

I also use the USAA brokerage, having been a USAA member for several decades. It's not the least expensive service out there but it's fine for what I do. Obviously, more trading activity in your account decreases your commissions. Bokerage trades sweep in and out of a decent money market. I can write checks ($250.00 or higher) on the mmkt or move any amount electronically from the mmkt to local checking. I don't have exact numbers in front of me but overall I don't consider the cost of doing business with them too significant. Most of my recent PM activity has been in GLD and SLV. I tend to have very specific trade goals, mostly looking for consistent base hits instead of home runs. When I'm in I watch the $20 swings with great interest. When I'm out I let it go and do other things. Any significant profits often go into holding long term silver/gold or better quality numismatic items. FWIW, YMMV. Trading is not for everyone.

MoneyLA

thanks for the replies.

I am curious if there are any short term traders of the physical metal? or is that economically unfeasible for fast trades with small price moves?

at what kind of a price swing does a trade of physical metal exceed costs?

thanks.

dbcoin

physical will get you 10% in/out at a minimum in large quantities. The ETF's are a much better mode of trading.

ProofCollection

<< <i>thanks for the replies.

I am curious if there are any short term traders of the physical metal? or is that economically unfeasible for fast trades with small price moves?

at what kind of a price swing does a trade of physical metal exceed costs?

thanks. >>



For me, a futures contract costs $3.50 to buy or sell, so $7 round trip. A mini gold contract (YG) represents 33.2oz, so a $10 move gets you $332 profit, minus $7. Of course you could trade a full contract (100oz) for the same cost, soa a $10 move means $1000 profit minus $7.

Of course, the same applies when it moves against you...

RedTiger

<< <i>thanks for the replies.

I am curious if there are any short term traders of the physical metal? or is that economically unfeasible for fast trades with small price moves?

at what kind of a price swing does a trade of physical metal exceed costs?

thanks. >>



Mostly it is dealers that might play that kind of game. As silver or gold comes in, keep it for a bit, when they think the price will go up, selling it over the phone immediately if they think otherwise. Forum member Deadhorse used to talk about some of his silver deals, but I haven't seen him around for the longest time. The dealer is the right side of the retail spread, so the spread is profit, not a cost.

Flippers can occasionally find wide enough price premium differences between various venues and buy in one place such as a local store, and perhaps sell on Ebay where the cashback promotion sometimes gives prices a bump up.