For those who watched Mad Money yesterday: How do I make a profit on gain days when comission comes into play?

Question

Jim Cramer said on gain days sell some stock to lock gains but what about the comission fees. you arent making money if your stock goes up 50 cents and you sell and your comission is $5. How do I apply Cramer's idea without losing a lot from comissions?

Answer 1

hey ill be your broker. I will only charge you $4 per share for my commission! hahaha

Answer 2

Mistake number One - Listening to Cramer,

Mistake number Two - try to invest/trade when you don't understand what is happening.

Before you start investing/trading you should learn what you are doing, why you are doing and how to do it.  Following Cramer is not the way to go.

Most experienced traders/investors do not have fees/commission as a primary concern in making decisions.  The services and producst offered by their brokerage firm are more important than petty charges.

Answer 3

That is the fallacy of day trading, which is in fact what Cramer recommends.  Unless you're dealing with large blocks of stock, the commissions will eat into your gains (not to mention capital gains tax).

Answer 4

Volume!  The sales commission is $5 for the entire order, not for each share.  So if your stock moved up 50 cents a share, and you own 100 shares, you're up $50 and pay $5 as commission to sell.  Still hefty, but not as bad as owning like 10 shares, where you'd make $5 and give it all up for the commission.  When buying and selling stocks, you should always buy a position that has enough volume to not get killed by the commission of buying and selling the stock.