When I buy shares and I do dayly I have two problems:
1, I never seem to buy at the current price when I confirm purchase Typically 1% loss
2. when I buy $20,000 I think I loose another ÂŁ80.00 paying in sterling.
Is this normal?
Hello there, and warm welcome to the community!
For your first point, there is no such thing as “current price”.
There are 4 prices that may be displayed, and none of which may pretend to be “the price”.
Those are the Bid, the Ask, Midpoint price, and Last Price.
The Bid and the Ask refer to the highest price a buyer is willing to pay and the lowest price a seller is willing to sell, and will be different. If the market is very active, it is likely the spread between the two will be very tight. If there is a lot of volatility, ground breaking news, low volume, or if it is a derivative product trading while its underlying is not open for trade, then the spread will likely be very high.
Sending a market order, you will buy the Asking price, and the only price available to sell immediately would be the Bidding price, which will be lower, hence an immediate “loss”.
The midpoint price is just the midpoint between the bid and the ask. Since there are no real justification to either picking the bid or ask for displaying, sometimes midpoint will be chosen.
The last price is the last traded price. It is indicative of the last time the asset has been valued by the market, but it absolutely doesn’t mean you will ever be able to get that price.
Hopes this clarifies a little, there just isn’t such thing as “the price”, and by nature of the order book, you will always have an instant “loss”.
As a side note, you mention trades of $20k. A single market order of this size is enough to consume a few orders outstanding in the order book, especially for smaller stocks / low volume trading; that means part of your order would get the first Ask price, until there aren’t any more shares selling at this price. Then you would get the next best price, and the next one… On small cap stock, you could easily get a couple $ of difference in the same order.
For your second point, I can see 3 reasons;
- FX fee; there is a 0.15% fee on converting currencies, on both buys and sells. That’s $30 out of $20k
- If you were buying from dollar to UK stock (as your post suggests), the LSE often has a stamp duty tax. Not sure how much exactly, but it’s the same range as the FX fee.
(Edit: Nevermind. “Paying in sterlings”. I guess FX from buying, and then selling?) - Isn’t the “loss” due to the order price like we’ve just seen?
Hope this helps, cheers!
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Stamp duty is 0.5% just as an addition to this post.
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