Brokerage

Referral to the Broker we use for futures trading

Brokerage Made EASY for YOU

Some of our students have asked us to refer them to a broker. We are posting some general information here so that if you happen to be looking for a broker, you will understand some of the parameters by which we chose our broker.

The broker we use can clear through several reliable clearing firms. We like our students to be able to be placed with the clearing firms that best fit their needs, especially as markets and technology change.

Some of the reasons we chose this broker are:


• 25% to 40% margin for fully electronic day trading (others are charging 50% or even full margins.)

• No practical limitations on number of contracts. (One of the biggest complaints we hear about from students using other brokers.)

• Ability to use any platform: electronic, electronic order routing, or open outcry (some others are electronic only).

• Superb choices of electronic trading platforms – some of the best overall we've seen.

• Availability of multiple electronic order routing platforms.

• Ability to trade all futures markets from a single account. (Others require multiple margin accounts for various combinations of markets.)

• Excellent service and ability to talk to a "live" person.

• Wide variety of acceptable orders.

• Better than average fills because of excellent liquidity.

• Electronic fills are instantaneous.

• 24-hour trading desk and 24-hour help desk.

• Open outcry ordering is routed for most markets directly to the floor.

• Really knowledgeable spread handling.

• Best fills we’ve seen anywhere for spread trades.

• Broker knows and understands spreads and the way we trade them.

A number of other brokers require full margins or margins which are higher than the exchange minimum margins. Some brokers require multiple accounts if you want to trade at more than one exchange, or if you want to do both open outcry and electronic trading. With most brokers, "other" fees are added on. Finding someone to speak with when you need such a person can be really difficult with some all-electronic brokers. In particular, if you are day trading, we have not seen any electronic platform that can beat the ones available through our broker for speed and ease of use. Having the various platforms allows you to "park" orders ahead of time, so that when you need to execute them, all you have to do is make a single click. When you see the price on your screen, the fill is generally instantaneous. This is due to the fact that you are trading with direct access to the exchange.

The screens show as much or more information than any other electronic screens that we’ve come across. The information available is now approaching the kind of information traders can see when using Level II screens for trading the stock market.

We receive a lot of reports from traders stating that their broker is front-running their trades, otherwise known as "slipping them a tick" in, out, or both. If you are slipped a tick on either end of a trade, your true "commission" rate ends up being very high. Also, beware of brokers who low-ball you into a relationship and then start adding all kinds of extra fees. We've been down that road ourselves.

You must also be careful that you are not unknowingly trading with a "bucket shop." There are some platforms from which you are not really trading at the exchange. Instead, you are trading at prices derived in-house at the brokerage firm. They are charging low commissions because you end up paying the in-house spread.

Some brokers charge lower than exchange minimum margins. They offer greatly reduced margins below exchange minimums to trade the E-minis. These are also bucket shops. You will be trading against the house. Your trades will not be traded at the exchange. The exchange has minimum margins which are much higher than those charged by these bucket shops. That means you lose all the protection of the exchange. The buyer/seller of last resort becomes your broker. If there is a dispute, you have no protection whatsoever. Your dispute cannot be resolved by the exchange because you are not trading at an exchange. You will be in a dispute with the broker who took the other side of your trade.

One last thing you should know. Many brokers are now offering fully electronic trading at rates of less than $5/round turn. We have seen rates as low as $3.00. But there is a catch. They use trading platforms which are customized to automatically close your position as soon as your margin is equaled if prices are going against you. They do not issue a margin call, they simply close you out and confiscate your margin. This may sound fair, but think — a trade going against you might begin going your way on the very next tick after they have closed you out and taken your margin money. You are given no opportunity to meet margin and stay in the trade.

If you are interested in a referral to our broker, please fill out the following form:

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Wishing you every success in your trading,

JR


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