Futures Trading Brokers

Different Types of Futures Trading Brokers

Choosing the right forex broker for your needs requires you to have a good understanding of the various types of brokers and the services they offer. Once you understand what options you have, you will then need to research each broker that is suited to your needs.

Full Service Futures Trading Brokers

First of all, there is the full-service broker which is excellent for traders looking for assistance with their trading decisions. These futures trading brokers offer a variety of services, including extensive research, one-on-one personal coaching, a personal account manager and much more. What happens is that they usually contact you with various trading ideas and you simply have to approve or deny.

However, each of the trades will incur a transaction fee as well as a commission which is usually a percentage of the trading volume. Unlike a managed account, a full-service broker will allow you to place your own trades as well.

The drawback with a full-service system is that the futures trading brokers make money on the volume of transactions, whether you make a profit or not. The problem is that some brokers, who are less than scrupulous, will suggest trades to their clients simply to get them to trade, not because it is a good decision. If they don’t have any transactions in a month, they won’t get paid, meaning that some will do everything they can to convince you to trade.

Discount Futures Trading Brokers

Discount brokers are the middle ground. In other words, they offer the same options as full-service futures trading brokers, including market information and analysis. However, the main difference is that you will not have access to tailored solutions and personalized advice, unless you pay for it, of course.

The advantage to using discount brokers is that you will have more control over your money and you can save a lot of money in transaction costs if you know what you are doing. However, be careful when requesting personalized assistance because the fees can often be astronomical.

Direct Access Futures Trading Brokers

At the other end of the spectrum, you have direct-access brokers which are more suited to professional traders. Using a direct-access broker you essentially bypass traditional futures trading brokers and work direct with market makers. While you will be using software, just like with traditional brokers, you will usually have to download it to your computer. The advantage is that there is usually less of a delay when executing trades, but, on the other hand, most of the software is not as advanced as the platforms offered by traditional brokerage services.

While many brokerage services offer both stock and currency trading, not all of these offer futures trading as well. So, before you sign up with any brokers make sure that they are also futures trading brokers, as the latter require a special license from the NASD that is different to that of stockbrokers.

In most cases, especially for beginner traders, the best futures trading brokers are the online discount brokerage services. These services are usually designed with the retail trading market in mind, namely the individual, and they provide excellent customer services and a wide range of resources at reasonable prices.

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