Category: Money tips Release Date: 2006-12-09
Transaction costs can be divided into several aspects: one, the transaction fee; 2, the transaction error; 3, other costs.
Some investors may ask the frequent trade fairs will not cause excessive transaction fees? Many investors are very disgusted with frequent trading, which is actually a misunderstanding, from a statistical point of view, the statistical sample size larger, then the smaller the statistical standard deviation, the higher the reliability of test results. If the number of transactions can not be too few transactions are reflected in the probability of success more frequently. Therefore, we say that there must be sufficient number of transactions in order to see that the probability of a successful transaction. Through empirical research, trading profits, fees accounted for 10 - 20% of the earnings results will not have much impact.
Deal errors are frequent in the transaction problems. Quotes from the analysis to the formation of investor trading decisions will take some time, may result in trading orders can not be timely, accurate issued, resulting in an increase in transaction costs. We have the decision-making point of view, the market is a random fluctuation, up or down is possible, therefore, in decision-making time, should be used in the form of decision tree, while the price up or down to the pre-prepared contingency plan, in order to try to avoid transaction errors .
Other costs refer primarily to the cost of capital, labor costs, and information costs. Itself is a cost of funds, if invested in the stock market on the loss of investment in other markets or sectors of the opportunity cost. But this was mainly profit forecast and investors, and if too little return on investment, I believe that no one would choose this investment. Labor costs and information costs are hidden costs, but it is also very important, why do we say that ordinary investors are not suitable for basic analysis of the reason why. Basic analysis requires a large number of professional talent, but also a longer study period, while access to information is also necessary to spend. Ordinary investors could not do that. On the other hand to consider, bodies have adopted, if this analysis method, then the cost increases are inevitable. The same is true of modern finance and investment methods. So, why the majority of domestic investors use technical analysis, but also partly here.
