Choosing A Broker

Finding The Right Broker


Ok, so you have done some research on the futures markets, and have decided to try your hand
at trading. You have by now evaluated which contracts to trade, either by interest in a specific
market, or by your belief that you have good information on future market moves through your
job, or contacts you deem well informed. The next decision to consider then, is choosing a broker.

The current trend in brokerage houses is to offer rock bottom commissions on round turns,
but very little in the way of information or support services for their customer base.
Although this option is good to have, there are certain issues to consider when looking at these
types of brokers. The first realization you should have is an old adage that still holds true, you
get what you pay for. Though some traders are experienced enough, and pay for enough
outside research to make use of these discount services, most of us will need a lot more help
from a professional to be successful long term. With most discount brokerage services, you are
on your own.

So then, what is the alternative? Full-service brokers can be a good alternative for the novice or
intermediate level trader. The basic idea of the full service broker is relatively simple, he or she
should be a person who is well informed, accessible to you, and able to help you avoid some of
the common mistakes made while trading. Additionally, a broker who is good for you should
be well informed on the markets you are trading, and able to give you recommendations when
you're struggling with market strategy. If you have traded before, you probably also know the
value of having someone reliable to resolve issues dealing with problems with your equity
statements, margin, or any other possible office error. The full-service broker should take care
of details and problems, leaving your mind free to focus on trading.

The question of commission is the last issue to address when evaluating the full-service broker.
What is a fair rate? This is a very relative question. Although you should obviously price a few
different brokers, to see what others in the field are charging, this question boils down to what
kinds of assistance you think you will need to trade effectively. Two questions to ask yourself
when negotiating your round turn rate are:
A: What is a fair price for the expertise and assistance this broker is offering?
B: Is the cost of using this broker an expense that you can cover, and still be profitable, on a
per trade basis?

Hopefully this article will help some of you to evaluate brokers with some specific criteria
in mind. As a licensed futures broker myself, I find that an informed customer is usually the easiest to
deal with, and more confident in his or her trading. The goal is to find an ally in your trading,
somebody who is invested in you attaining your goals, and this is a good place to start. I always
appreciate feedback from the trading community, so feel free to send me any of your experiences
or comments.

Good Trading!

Scott Ervin
Futures Broker
servin@webvestor.com

About the Author

Scott worked for 13 years on the CME trading floor, and now serves as a licensed futures broker in Chicago.
Scott
866-907-5227
servin@webvestor.com