Comparing Futures Brokers

Submitted by Craig Strzelecki on 5 May, 2008 - 20:04

Comparing Futures Brokers
You’ve probably been in the share trading business for quite some time now but has there ever been a point that you seriously thought of which tool you should choose for your trading and which broker you should use?

You’ve probably been in the share trading business for quite some time now but has there ever been a point that you seriously thought of which tool you should choose for your trading and which broker you should use? If there hasn’t, you’d better be doing that now because futures trading has never been as risky as now and if by this time, you are still struggling with the way the stocks shares move, ask yourself if you are really ready to do trading futures.

For those who still do not know much about Australian market, you have to be aware that the trading for the Australian future contracts is done in the Sydney Futures Exchange. For the sake of defining what a futures contract is, it is a commitment that involves the buying and selling of a particular trading instrument such as cattle, wool of a 90-day bill in an Australian bank at a given price for a certain date in the future called the final settlement date or the delivery settlement date.

Most businessmen in the field of import and export often transact in the futures for the matter of real business and misrepresentation. However, there is another type of people entering the futures who are not serious in following the final settlement date as stated in the contract. This is like inappropriate dealing such as buying herds of cattle and having them delivered to your home or office. This can be compared to those groups who do not consider the delivery of the primary commodities. They are also called day-traders, speculators, future traders and others.

Speculative traders or speculators use two ways to exit from a futures contract. They may either choose to sell a long position or buy a short position again.

We have brokers who exclusively deal with private traders. Be careful on choosing your futures broker because not all brokers do the same things our brokers do. If you want a full list of brokers to choose from, refer to our table of futures brokers.

Types of brokers to choose from

You may either choose to hire a discount broker or a full-service or full-time broker.

Your choice depends on whether you like your broker to work for you by giving you some of their value for the amount of trade you wish to accept or you are simply looking for a broker who would carry out your trade completely to get the best from you.

You may have to pay more for the service rendered by a full-service broker but it’s better to take his service especially if a future trading is new to you. This type of broker will feed you with all the necessary steps to take, will give you the necessary information you need, recommendations you may use in your trading and will keep an open communication with you to advise you on your investments. If you are new in the futures trading, you are more likely to get confused especially with the new terminologies you will encounter. The presence of a full-service broker will be helpful in enhancing your knowledge about the futures trading.

However, if you already have a background and experience in trading and you already know what to do in this field; you may opt to hire the service of a discount broker. Discount brokers do not have any rights when it comes to decision making especially when it comes to your accounts trading making them a perfect choice when it comes to practicality and affordability. Especially if you already know the different planning and methods of trading, an advice of a broker that would interfere in the decisions you would like to make will be useless.
Whether you decide to hire a full-service broker or a discount broker, it is very important to be aware of the fact that the futures trading decisions you make are solely yours. However, this may serve as a warning to those who are new in this business. You are mainly responsible for all your actions. Thus, you have to be very careful in making decisions because it’s your investment that might be lost if your decisions are executed without care.

How much account balance and margin should you maintain?

When planning to enter the trading business, you will have to deposit a certain amount of funds with your broker. The initial funds vary from broker to broker. The initial deposit ranges from $10,000 to $25,000 depending on what the broker requires. You can check our table of comparison for details.

Aside from the initial deposit, you are also required to provide funds for the initial margin of the initial futures contract you are contemplating to buy or sell. Usually, 5 to 10% of your initial deposit is your real investment and not the margin. However, you need to margin to reduce the risk of having a credit exchange. The margin is usually dependent on the highest possible price estimate that the futures contract may move within the 24 hours after trading.

Brokerage

Share trading brokerage is usually higher than the futures brokerage.

You may have to pay your futures broker a fixed fee for entering and exiting a trade known as the “per side” or both which is call “round turn”. However, there are some brokers may take some percentage from the trade’s gross value. There are also some who will require a combination of fixed rate and percentage. If you would like to pay lower commissions to brokers.

The Products Offered

You may now take advantage of the four products offered by SFE or The Sydney Futures Exchange. These include electricity, commodity, equities and interest rates.

Data

You need some data when trading and these are dependent on the frequency of your trading activities. It is expected that day traders need more up-to-date data than those who are interested in long-term trading.

There are some brokers that may give you different types of data such as historical or delayed data and live data on a broader range of stocks market.

If you would like to focus on long-term trading, historical data may be useful for you. This type of data is also good when you are considering trial and error before landing on the real one.

Trading system

You have two options for trading system; internet or online-based and software based. If you are always on the go and would like to trade anytime of the day and anywhere you are, an internet-based trading system is better for you. You will be given a logging on account so that you can just log on to the system through internet.

If you are someone who stays at a place for a long time, it will be better for you to use the soft-ware based system.

Download our FREE App


Signup for Free
Don't miss out on your free share trading articles.


Free Risk Money Management Calculator for those who sign up!