What Is a Futures Broker?
A futures broker negotiates contracts for the selling of goods or securities at a defined price on a fixed date in the future. Futures brokers typically earn a basic salary as well as a commission based on transactions.
Now, the next question is, how does a futures broker make it simple to buy and sell contracts without being a producer or manufacturer?
This article can help you get started. When looking for a futures broker, you need to ask them a lot of questions.
Questions To Ask A Potential Broker
Are You Regulated? If Yes, By Who?
Any investor who takes the opportunity to trade with an unregulated broker is taking a significant risk. When you choose a properly supervised broker, you are safe from abuse and theft, which is crucial in case something goes wrong.
Do You Reside in the Same Country?
For this question, you have to take note if you have a broker outside where you live. A broker that isn’t in your country of residence could deny you your rights as a trader, compared to a broker from your home nation that is obligated to follow the laws and regulations of your country.
Do You Have the Right Technology?
You’ve got to know if you can trade through them online or on your samrtphone for convience. Do they have an app you can download that can work for Windows, Mac, iOS, or Android?
Do You Have a Demo Account?
You need to know if you can practice trading before making a real account for yourself. You need to have an understanding of how their platform works.
Do You Charge for the Data Feed?
You need to ask beforehand if they will be charging you a trade feed or data fee, and you need to ask how much the rates are if they say yes. Data feed fees and commissions are two different things, and that brings us to the next question.
What Are Your Commissions?
Brokers will handle the compliance side, so they will charge you a specific commission for every trade you close. These are also called round-turn fees. These can sometimes get expensive and eat into your profits, so choose wisely!
Can I Rely on Your Customer Service?
There could be a scenario when you are in the middle of the trade and the power unexpectedly goes out. You have to know that you can give your broker a call during this kind of emergency. Will they allow you to manage your position over the phone, like placing a stop or limit for you?
You can also ask about specific scenarios. For example, say you want to place 20 trades, 20 micro contract trades, or 20 Emini contracts in a month. What would be their projections towards that?
What Is a Broker Going to Allow You to Do?
Basically, the broker will allow you to press a buy or sell button. As a trader, what you do is bet on a price. When you press the button down, and the market goes up, you earn a lot of money. However, if you press the button and the market goes down, you could lose a lot.
In the futures market, you will be able to buy or sell the market first. In short, they are going to allow you to buy or sell contracts. On average, a contract can cost between $50 to $7,000, which would depend on when you enter And there’s what’s called intraday margin and initial margin. What are the broker’s margin requirements?
The broker measures the price movement, or what is known as ticks. To make money, you have to buy low and sell high. It could mean that you can earn a lot from your initial investment, or it can mean that you could lose a lot. Before taking any risks, you have to know what you are doing.
By asking these important questions, you can zero-in on the best broker for you trading strategy. And since everyone’s trading strategy is unique, a broker that works well for one trader may not be a good fit for another. Start looking for your broker and ask the above questions to take the next step towards becoming a futures trader!