Posted By: Ilan Levy-Mayer Vice President, Cannon Trading Futures Blog
Discount Futures Brokerage is formatted to provide a more cost effective way of trading futures for experienced traders who are comfortable placing trades over the internet , using their personal computer..
Discount Futures Brokers typically offer lower service fees and take a more minimal role in daily trading decisions. What you are essentially using a broker since then, is to place orders and for representation on the exchange floor. It is true that futures trading, or any trading market for that matter, could not operate without market participants and market professionals representing those participants. With commodities markets being so risky, regardless of cost it is clear that qualified brokers are vital to the success of participants of various markets.
What’s The Difference?
The biggest difference with discount brokers is the client’s ability to be more self-directed with their trading profile. The risk associated with futures trading disclaims that there is no guarantee of profit no matter who manages your money. No matter the level of involvement, brokers still represent the interests of every client and are likewise as valuable. The need for Futures Trading Brokers will never become obsolete, so the emphasis on discount brokerage need be on discounted commissions and fees, not discounted service.
Below is a list of lesser or excluded fees associated with a discount futures brokerage:
- Account Maintenance Fees
- Platform Fees
- DataFeed Fees (Online/E-Trading)
- Low Margin Investments
- Broker Support Fees
Another difference with discount brokerage is the type of platform often used for this type of futures brokerage service; online. Online Futures Trading is in some cases synonymous with a discount futures brokerage. The reason this is, is due to lower costs associated with online platforms that allow you to do most of the monitoring of real time market data. A wide selection of online futures companies provide the software you can download to use to trade and build a profile. When one places orders online, he doesn’t need to call his broker and place orders via phone. That saves the time of the broker and allow for lower, discounted fees.
Consider using online Discount Futures Brokers that offer free or low cost real time quotes on all or many of the futures and options markets. Another great online feature is the speed and execution of daily trades. Online data is more often than not current and allows an accurate accounting of profit/loss, current positions, and daily account balances. The ability to direct your trading efforts gives a lesser degree of involvement to brokers on a daily basis, therefore minimizing your service costs.
Determining Your Trading Needs
Determining your needs can greatly assist in minimizing the service costs of any broker you have chosen to assist you in trading. The more decisions you can make on your own the more cost effective your account will be. Gaining a sound understanding of your trading markets of choice minimizes the amount of consulting you’ll need from a broker. Nonetheless, you’ll need a broker regardless of knowledge or experience to execute your trades, so looking into brokers who have lesser assistance fees will be of benefit. If you are someone who relatively understands a market and can make the most of your own trading decisions the counsel of a Discount Broker is most recommended.
Weighing Your Options
The best piece of advice you can be given is to strike a balance. You need the right amount of help in relation to the amount of investment and risk you are bringing to a broker. As you search for a choice Discount Futures Broker, you should investigate the following:
- How long they been in business?
- Do they have a respectful regulatory background? you can check any broker at: http://www.nfa.futures.org/basicnet/
- Choice of platforms?
- Is a broker available to assist you when needed? extra cost?
- Is there tech support?
- Is there a night desk?
- Commissions structure?
Disclaimer – Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.