7 Questions You Must Ask Your Futures Broker
Futures can be highly profitable as an alternative source of investments for investors. However, many have their full time jobs and won’t be able to devote much time and resources to trade futures.
Trading without much preparation may lead to losing much capital. The key here is to seek assistance of a broker who can give you sound advice on where to put your hard-earned cash in.
There are 7 questions you must ask your broker and consider before jumping on the band wagon.
1. How long have you been a licensed broker for futures?
The more number of years your broker has been exposed to the market, the better senses he or she is going to get regarding the market performance. Of course the ‘veteran’ broker cannot guarantee success of trading but will definitely have an edge over an inexperienced broker who is still trying to learn through mistakes.
2. How long have you been working with your current firm?
Ask for a work history from the broker. The longer the broker is at the firm, the more satisfied the customers are generally. This is because if the broker is unable to perform, the client’s base will reduce and the broker will be in search of a new firm for a bigger client’s base. As a trader, you don’t want to be part of that expense.
3. What is the ranking of your firm in the industry?
Smaller firms doesn’t mean that is has less experience brokers. However, it will be great if the firm has higher rankings in the industry to give you that extra added-value services and resources. Being a top broker means having to adhere to higher standards including hiring better brokers and vice versa of top brokers working with top firms. Either way, you will benefit as a client.
4. What are your commission rates?
This is a direct question and deserves a direct answer. Look out for hidden charges. If you find that there are charges that are not included in the initial quote, be wary of the firm. If the firm or broker can hide this straightforward answer, they may also hide other matters form you in the future.
5. How many clients do you tend to everyday?
Though common advices say that you should get brokers who do not have many clients so they can tend to you more, the question is why can they be so easily reached? It is implicit that successful brokers are wanted and they must learn to manage their tight schedule and timing. Brokers who have fewer clients are indication that they may be growing or rebuilding.
6. What analysis are you more skewed towards to, technical or fundamental?
You will want to make sure that the analysis the broker is prominent in, harmonizes with your own term of analysis. For example, if you are more fundamental in analysis, you will see not to trade in certain conditions even if technical analysis state otherwise. Though this may be subjective, you may want to find a broker which uses the type of analysis you are comfortable with.
7. What’s your track record like?
While it is difficult to accurately assess the track record of a broker, it is important to ask your broker this question as this will give an indication of the comfort level and risk tolerance of the brokers for their clients.
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