Want to calculate stock profits without errors? First, understand how to calculate trading costs.

Do You Know All the Hidden Costs of Investing in Stocks?

Many investors focus only on stock price fluctuations when buying and selling stocks, neglecting the various fees incurred during the trading process. In fact, to accurately calculate whether a stock is truly profitable, you must first understand the cost structure involved in each transaction.

The costs associated with stock trading mainly consist of broker commissions and exchange fees. These standards vary significantly depending on the trading region. For example, in the Taiwan market, investors need to pay a 0.1425% brokerage commission and a 0.30% trading tax; whereas in the US stock market, due to different trading methods, the cost structure is entirely different.

Taiwan Stock Market: Cost Structure and Calculation Methods

When trading in Taiwan’s stock market, the main costs include two items: brokerage commissions and trading taxes. Commissions are charged at the time of purchase, while trading taxes are only levied upon sale.

Cost Calculation Formulas:

• Purchase Cost = Transaction Amount × 0.1425% × Broker Discount
• Sale Cost = Transaction Amount × 0.1425% × Broker Discount + Transaction Amount × 0.30%

Taking Master Kong (910322.TW) as an example, if buying 1 lot (1000 shares) at NT$200 per share, with a broker discount of 60%:

• Purchase Fee: 200 × 1000 × 0.1425% × 0.6 = NT$171
• Sale Fee: NT$171 + NT$600 (tax) = NT$771
• Total Cost: NT$942

This means the stock price must rise above NT$942 to be truly profitable. Many beginners only look at percentage gains but overlook absolute costs, ultimately failing to reach profit targets.

Major Taiwan Broker Fee Comparison

Different brokers offer varying discount levels; choosing the right broker is crucial for reducing trading costs.

US Stock Investment: Cost Differences Between Two Trading Methods

Taiwanese investors mainly have two options for trading US stocks: through Taiwanese brokers’ cross-trading services or opening accounts directly with overseas brokers. The fee structures and profit calculation logic differ significantly between these methods.

Cross-Trading Method

Using Taiwanese brokers to buy US stocks involves the domestic broker placing orders with overseas brokers. This method incurs fees such as: handling fees (0.25%~1%), settlement fees, SEC fees, and other miscellaneous charges.

For example, Yuanta’s cross-trading:

• Manual order handling fee: 1%, minimum US$50
• Electronic order fee: 0.5%~1%, minimum US$35
• Additional costs include trading tax, system service fee US$3, ADR custody fees, etc.

Other major brokers:

• Cathay: 0.35% (minimum US$29)
• Fubon: 0.25% (minimum US$25)
• CITIC: 0.5% (minimum US$35)

Cross-trading suits medium- to long-term investors, but is costly for frequent traders.

Overseas Broker Trading

Opening accounts directly with overseas brokers often offers zero commissions. Main options include:

Interactive Brokers: Founded in 1978, the largest globally. Offers fixed US$0.005/share or tiered commissions, with US$10 withdrawal fee.

Mitrade: Low minimum deposit of US$50, supports TWD deposits/withdrawals, no commission, over 300 US stocks tradable.

Firstrade: 24-hour Chinese customer service, no commission, US$25 withdrawal fee, extensive US stock products.

Oanda: No minimum deposit, 0.1% fee, over 800 US stocks tradable.

Practical Case for Stock Profit Calculation

To accurately calculate stock profits, all costs must be included. For example, with US stocks:

If investing in 100 shares of Apple (assuming US$150 per share) via cross-trading:

• Purchase Cost: 150 × 100 × 0.35% = US$52.5 (using Cathay 0.35%)
• Sale Cost: same US$52.5
• System service and miscellaneous fees: US$6
• Total Cost: US$111

Unless Apple’s stock price rises more than US$111, no profit is possible.

In contrast, using zero-commission platforms like Mitrade, the transaction costs are mainly the spread, significantly lowering the profit threshold.

Cost Optimization for Short-Term Traders

Frequent traders often find traditional stock trading too costly due to accumulating commissions. CFD (Contract for Difference) platforms become a better choice.

CFD trading does not require actual stock ownership; profits come from price differences. They only charge spreads and overnight fees, with no commissions, no trading taxes, and no deposit/withdrawal fees. Even multiple trades in a single day won’t erode profits due to fees.

Platforms like Mitrade offer US stock CFDs with spreads as low as 0.01, ideal for day trading and high-frequency traders.

Key Factors Affecting Trading Costs

Trading Market: Different markets have varying regulations and fee standards.

Broker Selection: Large brokers may have higher commissions, but some small- and medium-sized brokers offer better discounts. Choose based on your trading style.

Trade Size: Larger transaction amounts incur higher absolute fees. Some brokers offer discounts for big traders.

Trading Frequency: High-frequency trading accumulates significant fees; choosing no-commission or low-cost platforms is essential.

Frequently Asked Questions

Q: How much does it cost to buy and sell Taiwan stocks?
A: Broker commission of 0.1425% (each buy and sell) + 0.30% trading tax (only on sell). Actual costs vary depending on broker discounts.

Q: How to calculate the true break-even point for stock profits?
A: Sum all buy and sell costs; stock gains must exceed this amount to avoid loss. Don’t just look at percentage increases—consider absolute profit versus costs.

Q: Which method has the lowest cost for US stock investment?
A: For short-term trading, CFD platforms are recommended; for medium- to long-term, opening accounts with overseas brokers is better; frequent but small trades may use cross-trading.

Start investing now by understanding costs. Choose a platform that fits your trading style to truly optimize your stock profit calculations.