If there’s one way to sabotage your futures trading career before it’s even begun, choosing the wrong broker is it. This is one decision you can’t rush into, it’s well worth taking the time to evaluate each and every broker before you sign-up. In this article we’re going to cover a few things you need to check out before jumping in at the deep end.
Speed of Execution
Site availability and responsiveness are perhaps the most crucial aspects to look for when selecting an online futures broker. You can have the cheapest commissions on the planet, but if their platform isn’t up to speed it isn’t worth swat.
Responsiveness of the site affects the timeliness of the real-time price quotes you get. Remember, we’re living in the information age, news travel fast, around the globe, 24 hours a day. Markets react to breaking news faster than ever before. You don’t want to be lagging, even if it’s just a few seconds behind, delays can cost you thousands of dollars.
Note: Your own internet connection should also be up to speed. You should upgrade to a broadband connection if you’re still using dial-up. If you’re using wireless, check that your connectivity is good before connecting. Because I can tell you from experience, that your connection failing mid trade is not good.
Ease of Use
Let’s face it, futures’ trading is already complicated, so there’s little point complicating it further by using a platform that requires a degree in computer sciences just to make a trade. An easy to understand user interface helps minimize errors, which can be extremely costly when you’ve got thousands of dollars are on the line. Look for a futures broker that offers single-screen order entry forms and you’ll make your life a whole lot easier.
Fees and Commissions
I know I said you shouldn’t put too much weight on commissions, but it would be foolish to ignore them. You need to look for a broker that offers an excellent platform, price balance. A good platform is great but not if it’s prohibitively expensive for your size of account. You don’t want to be paying expensive data fees if you’re only trading once or twice a month.
Per Contract Fee – Most online futures brokers charge a per contract fee, which makes it easy to compare prices. This fee is usually reduced the more contracts you buy.
There are some other hidden fees you need to look out for however.
Broker assisted trades are considerably more expensive than internet only trades and as such should only be used as a last resort. There can be huge discrepancies between what brokers charge for assisted trades, some charging as much as $80.00 for a single trade. So if you think you might use broker assisted trades a lot, check out how much they charge first.
Most brokers offer a sliding scale fee that reduces the more contracts you trade. How much discount you get varies from broker to broker. So if you’re planning to make a lot of trades check out how much discount you’ll get. You might be surprised as some of the brokers who you might think are expensive, offer some very reasonable rates if you trade in volume.
To offset their low commission charges, some discount brokers charge a slew of hidden fees. So if a futures broker charges an unusually low fee compared to the industry norms, make sure you find out whether there are other fees that you should be aware of. Some common hidden fees include:
- Account Inactivity Fee – Some brokers charge a fee if you don’t make any trades after a certain period of time.
- Annual Maintenance Fee – This fee is levied every year as long as you have an account with the brokerage firm, whether or not you have made any trade.
- Minimum Balance Fee – This is a fee that’s levied periodically (monthly or quarterly) when your account balance is below a certain threshold.
So there you have it, follow this simple guide and you should be able to find a broker that perfectly fits your trading style and experience. It’s not really possible for us to recommend the perfect broker for everyone, but if you’re new to futures the best broker for you can choose is optionsXpress. They have one of the best trading platforms around with a professional tool-set.