How To Choose A Futures Trading Broker

10 Tips On Choosing The Right Futures Broker

Here are 10 tips on knowing how to choose the right futures broker for you.

1. Expertise

You should always aim for a broker who has strong knowledge in the futures market. When you are engaging with a broker, you are not only engaging his services to put in an order for you, you are engaging his expertise and knowledge as well. Therefore it’s important to ask a broker what knowledge or strategy of assessment of the market he has. For example, does the representative know how to use technical orfundamental analysis? Is the representative well versed with the industry? A broker with a strong expertise background may help you to spot opportunities as well as prevent you from making further losses when the market is against you.

But before assessing the broker, you will need to do a little research on how to analyze the market using different indicators and analysis. You can then ask some subtle questions or make comments to see how the broker responds.

2. Track Record And Reputation

A great way to determine whether the futures broker is right for you is to look at his track record and reputation. You can do so by checking with Bursa Malaysia. You can check whether there are any ethics complaints about the broker or whether there are any disciplinary actions taken against the brokerage firm. You will want to find out because if the firm has treated the clients with questionable conducts, they may treat you the same way in the future. You will want to look for behavioral patterns.

You can also do a check at futures forum and ask about the services of different brokers. However, do keep in mind that this serves as a guidance and not as an absolute reference, because these are just opinions of other individuals.

3. Regulations And Policies

Ensure that the broker you choose follow regulations and policies from the authority, which in Malaysia will be Bursa Malaysia Derivatives. The futures broker should have someone overseeing compliance issues and matters. Ask who is in charge of the compliance and check for the background of the person in charge. This is to avoid unwanted and unclear disputes where both the futures broker and client may suffer.

4. Speed Of Execution

Although brokers have live streaming quotes on their trading platform, the question is still how fast can your representative execute your orders of entering into a position? Speed of execution is important especially if you are a day trader or using a 5 minutes chart. You will want the broker to lock in your position as soon as you give a clear order.

5. Commission Rates

Commission rate is one of the main considerations for choosing a futures broker, and even more so if you are trading a significant volume. However, know that although commission rates may vary among brokers, it is not necessary to choose the broker with the cheapest rate. Some brokers may charge a high commission rate if they are providing outstanding performance and services. But the performance and services should reflect the percentage of higher commission asked for. Of course this factor also depends on your own personal level of experience and level of involvement of trading futures.

6. Ease Of Accessibility

Find out how easy can you access your brokers. Especially when the market is busy and volatile, many traders are expecting to profit movement of the market. During then, will the broker firm have enough futures representatives to take your orders? If not, you may be missing on opportunities or losing more money than you should.

7. Honesty

It is extremely important that futures brokers have this trait of honesty. This is because brokers make commissions for every order that you trade. Thus, the more trades you place, the more money the broker gets. Therefore, be careful of brokers who are trying to push too hard for their own greed. Avoid the high sales pitch from these brokers and make sure they have your interest in mind.

8. Tools And Value Added Services

Find out what are the free services the futures broker is offering. Some may offer certain forms of free research, news, software, information, education and analysis tools. These value added tools and services are important as they will help you to cut short your learning curve very much as well as have a competitive advantage over other traders.

9. Customized Customer Service

Assess how the broker handles customer service. Every trader has different requirements of trading. Some are more risk averse than others. Some are looking at shorter terms of investing than others. Can the futures broker cater to your customized needs? Explain to the firm what are your expectations and requirements and check if they are able to provide the customized services you demand.

10. Chemistry

Some may find this a crucial point. Bear in mind that futures investing is a long term endeavor. Finding a comfortable broker is key in communicating. This is because communication can mean a difference in building your wealth or having your losses.