# Costs of trading



## justforgroup (30 Dec 2009)

Given the costs below, I find it hard to believe that the little (Irish) guy can make any money trading? Is it really a fools game? It all seems exorbitantly expensive?

Costs:
Per trade+VAT@12.5% (using TD Waterhouse standard rate): €22.50
Irish shares: Stamp duty @ 1% of transaction value
UK shares: Stamp duty @ 0.5% of transaction value
Capital Gains Tax @ 25% on profit
Income tax @ 20%/ 42% on dividends

So a simple example (note that these costs are PER TRADE)
Buying 100 CRH @ €10 will actually cost you:
€22.50 + €10.23 = €32.73

Selling 100 CRH @ €15 will actually cost you:
€22.50 + €15 + ((1500-1032.73)*25%) = €154.32

So CRH would have to rise by almost 19% merely to pay the €187.05 in costs!?

Does anyone really make any money trading or are they just ignoring these costs?


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## strmin (30 Dec 2009)

It is one of the reasons why I gave up trading in Ireland.


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## mercman (31 Dec 2009)

OP your calculations appear to be incorrect but saying that the Irish market is to illiquid to do short term trading


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## dontaskme (31 Dec 2009)

assume you buy 100crh at 10 and ignore the cgt at first
32.73+33.73=65.46 are fixed costs (using 11 as sale price for the sake of argument.)
so you will need 1065.46 after cgt to cover costs 
so 65.46*100/75 = 87.28
so you need about 8.8% of a share price increase (to 10.88) just to break even.
But your point stands; it is not easy for the little guy to make big bucks with these charges.


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## strmin (31 Dec 2009)

mercman said:


> OP your calculations appear to be incorrect but saying that the Irish market is to illiquid to do short term trading



Long term investors should take annual cost (€60-100) into consideration.


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## mercman (31 Dec 2009)

strmin said:


> Long term investors should take annual cost (€60-100) into consideration.



But this is spread across a complete portfolio, and not just one share.


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## roro123 (31 Dec 2009)

Would the fact that stampduty here being 1% have any bearing on the liquidity of the market? Would abolishing stamp help improve the market, after all it seems that the government makes more from the transactions than the broker.


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## justforgroup (31 Dec 2009)

Anything which reduces the cost of share trading would be a good thing, however it's CGT which is the real killer it seems.

I really have to question all these posts on AAM where the traders say they have made money - are they only looking at how much they made from the sale (i.e. bought for 10 and sold for 15), and completely ignoring CGT (assuming they're paying it of course )?

Is there ANYONE on AAM who can put their hand on their heart and say they have made a decent living out of trading?


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## mercman (1 Jan 2010)

justforgroup said:


> Is there ANYONE on AAM who can put their hand on their heart and say they have made a decent living out of trading?



I have done, but not in the past two years. Whilst there are those criticizing CGT, this Tax was lower in Ireland than many other euro countries for quite a number of years. What do you expect -- pay no tax on your profits.


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## roro123 (1 Jan 2010)

I think the stamp is worse than the CGT, purely from the competitive point of view. Perhaps more companies would have primary or secondary listings here and maybe we'd have more choice in brokerages.


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## mercman (1 Jan 2010)

Shares purchased on the Irish market and sold within a 10 day period can have the stamp duty refunded.


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## nbaki82 (6 Jan 2010)

I hate the stamp duty. It is really introduced for no reason. The government is worse than Ryanair.


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## roro123 (8 Jan 2010)

mercman said:


> Shares purchased on the Irish market and sold within a 10 day period can have the stamp duty refunded.


I cant seem to find any reference to this anywhere. Is this done by your broker or do you have to claim it back yourself?


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## mercman (8 Jan 2010)

The broker should and normally will arrange the refund.


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## Peter P (9 Jan 2010)

Yes, if there is no refference, i think broker should refund the money. When it comes to trading, one of the most neglected subjects are those dealing with trading psychology.


[broken link removed]


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## justforgroup (9 Jan 2010)

Peter P said:


> Yes, if there is no refference, i think broker should refund the money. When it comes to trading, one of the most neglected subjects are those dealing with trading psychology.


 
No, the most neglected subject are the costs ;-)
An individual trader just cannot make money when each share has to move such a large %, just to cover the trading costs.

Either people are not making their tax returns, or are fooling themselves into what is their actual profit margin.

I also note that no one has replied to post #8 that they have made a profit from trading; this is despite the thousands of posts giving investment tips etc.


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## mercman (9 Jan 2010)

So, justforgroup, your recommendations are ?? I'd love to hear them.


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## Pexus1976 (9 Jan 2010)

justforgroup said:


> Given the costs below, I find it hard to believe that the little (Irish) guy can make any money trading? Is it really a fools game? It all seems exorbitantly expensive?
> 
> Costs:
> Per trade+VAT@12.5% (using TD Waterhouse standard rate): €22.50
> ...


 
Justforgroup, 

Your figures are only based on a €1k share purchase, really dont understand what your point is?


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## mercman (9 Jan 2010)

+1


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## Daytrader (9 Jan 2010)

+1.. Given the small size of your trading account and the short term nature implied in your post, you are using the wrong product to trade with. Generally, if you are aiming to scalp or close a trade within a month or two, you would do better by using CFDs or spreadbetting and pay the interest charges on your long position. The benefits are:

To leverage your position
And to escape paying stamp duty.
If you are planning to hold the investment say for 3 months or longer, the accumulation of long interest on CFDs would make it an unwise choice of product. And so the share trading route would be better..

I would just add these products should be only used by professional traders and not by novices.


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## fiatmoney (9 Jan 2010)

Is there ANYONE on AAM who can put their hand on their heart and say they have made a decent living out of trading?[/QUOTE]

Look justforgroup, no trader is going to boast about how much money he/she makes trading, if someone does they are probably lying (boasting is not part of a good trader's profile).

Making profits trading any size of an account is possible the key is LEVERAGE, however, this can also work against you. It is not for the faint hearted, *educate* yourself and give it a go


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## Senorito (10 Jan 2010)

I would not be a fan of leverage myself so to advocate it to the masses is somewhat irresponsible. That said, to those that know what they are at, yes, its a game changer of course. I will never use leverage as I simply would not have the mentality for it. That is a personal thing.

What hasn't been mentioned before is the spreads on some Irish issues. Looking at FBD there recently I noticed there was a 35 cent spread, which for a EUR7 stock is a bit nuts to be honest. Compound that into your calculations and you need an even bigger gain to break even. Market maker is obviously trying to make up for lost liquidity by taking the p1ss with the spread.

I have not really bothered trading Irish stocks bar one or two highly liquid and highly promising issues. I have been more an NYSE/NASDAQ investor (not trader). As a couple of people previously pointed out (Daytrader/Mercman) you really need to be looking further out on the investment horizon. If you are not medium/long term, going long on stocks may not be the correct way to play the market. Also, small lots of 1k is going to do nothing but make you broke, which is unfair for the average retail investor as sometimes lots of 1k is all they can afford. You really need to be going up in the lot value to make it worthwhile.

I will also add, you use TDWaterhouse as the broker in your example. Try using any of the Irish ones (Davy/Goodbody etc) and you will find your commissions far higher. Even though they offer a research facility I find their charges complete extortion and unfortunately for those trading with a corporate account (ie. Irish resident company account) you have little choice as far as I am aware so essentially what I am saying is, you could more or less double those commissions in your example above. Its only recently that TDW are available in Ireland. Lets hope more come to the party as it will elliminate the cartel approach in Irish investing.

Back to the point of the post: I do believe it is possible to earn a living from trading alright. But not the Irish market. You would need to go to where the heavy duty funds invest and that really is the NASDAQ/NYSE. At the end of the day it is the big US institutions that will rocket a stock price, not a mickey mouse Irish institution. It is there you tend to get the nosebleed rises and falls. Along with this, you would need a very cheap online broker and you would need intimate knowledge of swing/position trading. All of the above I dont really do myself as I wouldn't have the b@lls for short term trading on a continuous basis. I'm more of a fan of the business cycle approach, start buying in bulk during a recession/bear market (obviously timing being important here) and then start going to cash when you get nervous or things start looking top heavy and everyone is getting greedy. You would also need a lot of experience in the area of trading and have traded through plenty of ups and downs. 

All of the above, a very efficient loss cutting approach and a large cash balance should see you making a decent living out of it.

It all sounds great. I would say the practicalities of it though are quite different

Mercman, you mentioned you made a living previously but not in the last two years. Why not in the last two years. I would have thought the volatility of the last two years, the financial crisis and the ride up from the March lows would have set the stage for spectacular returns?


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## mercman (10 Jan 2010)

Senorito said:


> Mercman, you mentioned you made a living previously but not in the last two years. Why not in the last two years.



Simply haven't done too much as I was in battle with a Financial Provider where the Ombudsman found in my favour but getting the money is becoming a far bigger issue. Very much a case of I won the War but lost the Battle.


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## Senorito (11 Jan 2010)

I heard you mentioning this before alright. I do hope everything works out for you. It will.


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## demoivre (11 Jan 2010)

Leverage is a key factor in short term trading as has already been mentioned. The type of product being traded and the costs involved are also crucial. Buying and selling 10 lots of FTSE futures valued at GBP550,000 approx. costs me GBP20.60 - the initial margin on such a trade is about GBP20000. The stamp duty alone on the purchase of €610,000 ( approx value of GBP550K) worth of Irish shares is €6100 !


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## barryl (9 Sep 2010)

mercman said:


> Shares purchased on the Irish market and sold within a 10 day period can have the stamp duty refunded.


 
Ive just been onto my broker about a refund of sd for a trade i made and sold within 10 days.he had no idea what i was talking about.can you give more details please.thanks


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## mercman (9 Sep 2010)

barryl said:


> Ive just been onto my broker about a refund of sd for a trade i made and sold within 10 days.he had no idea what i was talking about.can you give more details please.thanks




Are you dealing with an Irish Broker or an overseas Broker ??


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## croker (9 Sep 2010)

em.. unless i'm missing something, CGT doesn't even apply here in the example given by the original poster. 
Buying 100 shares @ €10, selling @ €15 is a €500 gain(less commission) and the first €1270 of gains is tax free so no CGT.


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## barryl (10 Sep 2010)

yes i deal with davy


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## barryl (10 Sep 2010)

mercman said:


> Are you dealing with an Irish Broker or an overseas Broker ??


  davy stockbrokers


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## mercman (10 Sep 2010)

barryl, I have checked and have been advised that this has changed a few years ago.This is the way it used to be but there is no way in getting away from Stamp Duty. Please accept my apologies for offering the incorrect advice.


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## barryl (10 Sep 2010)

mercman said:


> barryl, I have checked and have been advised that this has changed a few years ago.This is the way it used to be but there is no way in getting away from Stamp Duty. Please accept my apologies for offering the incorrect advice.


 

what a nice person you are.thankyou


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