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Today's Featured Article
Today's article isn't going to be about my trade of the day, technical analysis, or some system that can make you money. However, this article will be about getting back to the basics and the importance of a good broker -- customer relationship.
Probably one of the most critical parts of your futures trading endeavors will be choosing a licensed broker. The reason I say this, is you need to know that your broker is on your side and available day-to-day. Your broker should be a trade coach, and either giving you trading strategies, or just a simple call to place a stop tighter to attempt to protect profits or limit losses. Remember, good brokers are watching these markets daily and are accustom to providing this service. Their knowledge may be invaluable.
I suggest, performing a broker search at the National Futures Association's web site. Here you can learn about your broker and see if he or she has any regulatory actions, NFA Arbitration Awards, or CFTC Reparations Cases. You can also research the firm they work for and even the clearing firm (F.C.M.) that holds your investment. If the broker has worked for five different firms in five different years, this should be a warning. In my opinion, this means he hasn't been able to be successful and keeps changing firms. Consider this his/her resume because everything you need to know is right there.
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Choosing an online trading platform
This is also a critical area because in this day and age, if you're paying for the trading software, quotes, or charts you're trading at the wrong firm. There are many complimentary and reputable solutions without gimmicks. Having said that, investors should exercise caution as there are a lot of bait and switch tactics taking place among firms offering super discounted rates. Why does this practice occur? Because the brokerage firm knows that once your account is set-up, the likelihood of you changing is small. You need the broker or firm to be up front with what the "All-In" charges will be. Basically, your job is to make sure there are no surprises contained in your monthly
statements.
The next thing you need to ask yourself what type of client am I. I'm seeing a disturbing trend in this area and will explain shortly.
Self Directed: This means you call your own shots. You don't call your broker every day and you will typically receive the cheapest online rates. However, depending on your experience this may carry more risk.
Broker Assisted: A premium is charged typically ranging from $15 - $45 per round-turn but perhaps can be worth its weight in gold. A true professional broker will give sound advice, risk management, trade opportunities and trade coaching.
Managed: This is usually reserved for Automated Trading Solutions or Commodity Trading Advisors (C.T.A.) (Systems). Commissions range from $10 - $35 per round trip.
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Now you ask, what's the disturbing trend? What I'm seeing is prospects call in, negotiate a discounted commission rate then ask for full service. Traders must realize you pay for what you get. If you have an online discounted rate, don't expect help from your broker. Again, the key is to be honest with yourself in terms of what kind of service you will require and in turn what to look for from your broker relationship.
Also here are a few things traders should look out for. During my career I've seen too many clients get taken by these indicator companies and trading education firms promising the world. Realize these companies are NOT regulated by the National Futures Association. In my opinion anything goes in this arena with regard to false advertising. Typically, the more they charge up-front, the worse the indicator. This goes for educational companies as well. I've heard of some of my clients paying up to $14,000 for a course, only to come back and be a worse trader.
Perhaps, all they needed was a good broker to coach them.
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About the Author
| Drew Rathgeber
began his career at one of the country's largest gold and silver dealers and has since transitioned into futures dealing with similar commodity products. Drew is a senior trader at Trade Center, LLC; holds a Series 3 commodity license & registered with the Commodity Futures Trading Commission (C.F.T.C) and is a Member of the National Futures Association. With his training and experience, he created a trading philosophy, known as the "Rath" overlay, a tool designated to help the everyday trader. |
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Special Message from Our Author
Want a complimentary coaching session?
Join us today for a complimentary coaching session and Learn How to Trade Futures. Brought to you by Trade Center, LLC, this seminar will empower you with the knowledge to hopefully help you make smarter trading decisions! Participate in either a group webinar or a one-on-one session...complimentary! Sign up today. |
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