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Low cost stock trade

should be based on risk levels

Cheap stock trades
are result of your trading discipline

Low cost stock trade is typically associated with discount stock broker. It made sense when typical stock trade had costs north of 100 USD but these times are over.

There are plenty of good stock brokers offering quite reasonable price for stock trade execution. Typical good stock broker's commissions are today between 1 USD up to 10 USD per typical trade. Typical trade is less then 5000 shares bought or sold.

But for me price of stock trade is not the most important part of stock trading. I understand that stock trading is a business. As business it has also its own costs and expenses. And cheap stock trades execution is one of my business costs. Another costs are Internet connection, my trading computers, subscription to some newsletter and investment research I pay, price of my realtime stock price data feed and so on.

If you want to be profitable stock trader or investor you must understand that trading is a business. And it has its own expenses.

Cheap stock trades
are not only about commissions

Cheap stock trade means for me stock trade executed in accordance to my stock trading system and stock trading strategy. Every trade must be based on stock trading rules I have prepared in my stock trading business plan. It has specific rules for :

review of current stock market situation
selection of proper stock trading strategy for actual stock market situation
screening for possible candidates for specific trading strategy
preparing individual setups
proper risk and money management for such setups
when trade is opened then proper trade management during all time of opened position
and finally closing of position based on trade management rules defined in my stock trading system and strategy

Low cost stock trade
is trade with proper risk management

All points above are important, but I think that one of the most important are rules for risk management of trade and for money management generally. Money management should help with position sizing and decision how much I can risk on one single trade . It means it will tell me how many shares I can buy (or sell short) when entering the trade.

The most important part is definition of stop loss level in price of stock I want to trade. This stop loss level is crucial to be able manage low cost stock trades. Why ? Because it is necessary to arrange that your risk is small comparing to possible profit from your trade. You have to set up risk management rules to have very favorable risk reward ratio . Only trades with really good risk reward ratio should be entered. This is very important condition to achieve low cost stock trade.

Trade management rules must be observed too. Rules for trailing stop level as trade develops are very important. Why ? Because not all trades will reach expected target. And because not all trades will be profitable. But it is important to keep losses as low as possible to achieve our goals - profitable month, quarter or year.

Please remember it and understand that