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Building a trading system Part 3


Cost of doing business.

You want this setup straight.

Shop around for the best deals:

Try a local shop and find a hungry junior broker.

Pretend to be a big whale.

Demand phone pic up on first ring-no matter what(trust me, you need this in a six sigma event)

Diversify (more importantly, clearing houses than brokers)(everything can go belly up-you don't want to work for years on extracting money from the markets to find it tied up in a chapter eleven of your clearing house)

Negotiate fees for various sizes(it is a lot easier to do this when you do not trade size yet than later down the road-think big)

Be aware that your commissions get the brokers' kids through college(yes, this small stuff adds up), and use that leverage in your negotiations.

If at all possible(ask grandma, if need be), wire a six-figure amount into your account (to only withdraw it a few weeks later, which is at a futures brokerage, and you were stating trading S&P, a substantial amount with the 50x leverage of the S&P.(this will be getting the junior broker promoted to senior and now you have an ally)

Incorporate with the broker to the exchange-this reduces cost by quite a bit.

On electronic exchanges like crypto-become part of their VIP programs and offer the bids out versus taking them.

In short, you want this set up correctly and take your time on this-these negotiations are easy when you trade small and get much more difficult later down the road.

Most and foremost, be aware of your risk:

You want to trade the micro contracts to be able to trade that small that you can handle your overall risk psychologically, yet at the same time, be aware that a round-turn trip on the micros costs you about half of the commissions than the minnies. In other words, your trading risk on S&P minnies could be $5 with a single tick increment worth $12.50, while the micros might cost you $2.50, but your single tick is now worth only $1.25. In this example, your cost of doing business has now exploded for trading micro contracts and needs to be reflected in your trading system (stepping up a time frame).

As usual, the devil is in the details, so do not procrastinate but set up this part of business professionally at the game's early stages.

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