Top Things to Consider When Choosing a Futures Broker
Posted By:- Ilan Levy-Mayer Vice President, Cannon Trading Futures Blog
With many economists, researchers and traders calling for the next bull market in commodities, and you have disposable risk capital to take advantage of these potential trends you may be asking yourself – How can I begin my search for a solid reliable Futures Broker? I have included 9 items below that you should be cognizant of to assist you in finding a reliable partner for your commodity trading needs.
1. The Futures Brokers history
How long has the Futures Broker been in business? What is the commodity trading brokers regulatory history? you can check here by selecting BASIC then responding to the prompts to bring up a regulatory profile of the firms or individuals that you are interested in researching. http://www.nfa.futures.org/ Many times you will be able to find a nuisance regulatory issue and other times you may find regulatory actions that would cause you to pause. If you pause, move on to another broker as all legitimate Commodity Futures Brokers must be registered with the National Futures Association (NFA). if you can’t find your broker on the NFA website, you may not be dealing with a regulated entity.
2. Trading Platform choices
You would be looking for a Discount Futures broker if platform choice is critical to your trading strategy. Opportunities to use a variety of tools and risk management software to enhance your trading experience as an online, self-directed trader will vastly improve your traders toolbox. Preferably you will want to use a Discount futures broker that can offer a wide array of trading solutions software to execute your plan. Not all Platforms and Data feeds are alike and in this day of wifi and internet , the speed and accuracy of your software will be critical to your success, not to mention the bandwidth you will be piping into your computer.
3. Know what you are looking for.. strictly online self- directed or broker assist , or for the time constrained investor, a managed portfolio
Believe it or not many Discount Futures Brokers who specialize in self directed traders don’t have qualified staff to effectively answer more complex questions about markets, market mechanics, order mechanics and risk management techniques. If you are a beginning trader or a novice it is highly recommended that you employ the services of an experienced futures broker to assist you in avoiding many of the pitfalls that are inherent in any endeavor that you engage in, especially in Futures Trading. Once you are accomplished and master a few techniques, the broker can offer a trading platform with lower fees from which to trade. The extra money spent for his or her services will save you from making very expensive mistakes in the DIY or “Do-it-yourself” mode and provide you with a solid foundation from which to build.
4. Additional market technical support – Support and Resistance numbers
Commodities trading brokers who are experienced will often times create their own support and resistance numbers that have been utilized by their client base to identify potential decision areas from which to trade. Informational webinars are also a keynote, or hallmark of accomplished futures brokers that will often times offer invaluable insight into market dynamics that often times are offered to the customer base, free of charge In addition to other technical services.
5. Responsive staff / knowledgeable staff on the phone
When you first contact the prospective brokerage by phone, do you receive call center recording software asking you to hold on with easy listening jazz music in the background to fluff and relax you while you wait to find out what your position is for the next available specialist?? or does a broker answer the phone on the first ring?.. This is a clear cultural gauge of what is important to the firm. Who is most important? the client? or the employees… Think about that the next time you call a government office or your favorite restaurant for a “dinner at 8” reservation, you will then see very easily, upfront where a firms priorities lie.
6. When a problem arises how soon is it resolved?
Is your issue put at the bottom of the stack, do your concerns fall on deaf ears? it’s time to move your account, after you have up streamed your issue to receive a meaningful response.
7. Competitive rates commission
Day trading margin rates there is a difference between competitive pricing and cheap. you do get what you pay for. Enough said?
8. Offers Support 24 /6
Does the firm have a staffed trade desk with accountable employees after hours? if you have a managed account let your broker worry about it, if you have a broker assisted account, let your broker worry about it but if you are self directed you may need an after hours trade desk to help you manage your risk.
9. Filters services.. good services bad services
Ask a broker about online educators for valuable opinions about which educators are reliable. Many are not and with your brokers guidance, his or her input will be invaluable. Many brokers have solid knowledge of reputable firms that can also assist you up the learning curve and have probably heard of a few, as presented by their own customers, that one can only characterize as less than reputable.
As always, take notes, compare products and services and take the time to establish a bit of a relationship with your trading partner.
About John D Thorpe: Compliance Officer at a top five brokerage, Spent 5 years on the Chicago Board of Trade floor and is a Senior Commodity Broker with Cannon Trading since 2002.
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.
By John Thorpe