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I buy and sell stock through my bank. The various bank/broker/tax overheads, if I was to buy stock and immediately sell it at the same price, is roughly 3%. I am seeking to understand what exactly those overheads are, and how I could minimise them.

To take an extreme case, high frequency traders make orders on millisecond timeframes, a timeframe too small for stock to fluctuate more than 3%. So, necessarily, high frequency traders enjoy a smaller "buy/sell roundtrip" transaction overhead of less than 3%.

For specificity, let's pick the London Stock Exchange. What are the smallest transaction fees available there? How can a "sophisticated" trader make use of those small transaction fees?

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    It is worth pointing out the HFT-ers do things far beyond what you might do and you shouldn't even consider yourself in the same set of investors. You're not going to pay to locate yourself in close physical proximity so that the electrons reach you before your competitors. There are other options out there, but I think you need to be realistic. – THEAO Sep 13 '13 at 12:50
  • @THEAO: Sure. I want a "global picture" understanding, out of curiosity. – Randomblue Sep 13 '13 at 12:56
  • What you are currently doing is investing. What HFT do is trading, they don't intend to hold stocks for more than a day. So you should first decide what you would want to do and then go that path. You cannot mix both in the same category. – DumbCoder Sep 13 '13 at 12:59
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    We can't really understand your overhead without you telling us more about the kind of broker you are dealing with, and the kind of taxes there are in your country. Are you dealing in foreign stock and there is a currency exchange taking place on each buy & sell? Please add more detail. For instance, are you in the U.K. and trading on the LSE, or from elsewhere, with an account denominated in another currency? Is your bank's brokerage considered a "discount" broker with a low, flat-fee commission, or percentage based? – Chris W. Rea Sep 13 '13 at 13:12
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    In the US, a typical online broker fee is $8, and many are as low as $4-$5. On a $3000 trade (100 shares of a $30 stock) you say you are paying nearly $100. This is high regardless of your trading level. – JoeTaxpayer Sep 13 '13 at 14:14
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The lowest cost way to trade on an exchange is to trade directly on the exchange.

I can't speak to the LSE, but in the US, there is a mandated firewall between the individual and the exchange, the broker; therefore, in the US, one would have to start a business and become a broker.

If that process is too costly, the broker or trade platform that permits individuals to trade with the lowest commissions is the next lowest.

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