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Commission shopping w/brokerages
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Commission shopping w/brokerages

  #21 (permalink)
Trading for Fun
New York, USA
 
Futures Experience: Master
Platform: NinjaTrader
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Who we are dealing with? What are their motivations?

What is the Futures Broker thinking? Maybe it's goot to try to get an idea what we're really doing since we are on the other side of the negotiation with them. So I'll take a few guesses.

The broker wants to get some idea of my trades per month. They will be making a profit from my volume.

If it's true that most fail, then they must be figuring I won't last too long either, so they will want to lock in early profits before my trading demise.

If I've traded before and I have had at least one account, then I look a little better since another broker, their competition, has already profited from my trading. Or is my demise sooner?

The larger my initial deposit, then the longer I can trade for them, before my demise, and I'll likely have a larger volume of trades, so that's gotta be a big one. What trader is going to pull the plug on their trading before they've really killed the account? If I'm trading impulsively, then I'm not about to suddenly be disciplined and know when to quit....

What are their thoughts and motivations so we can be prepared, rather than how unprepared I was and I'm thinking perhaps many of us are currently, Ray mentioned during the webinar that there may be 10,000 traders affected.

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  #22 (permalink)
Elite Member
Florida
 
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jaytrades View Post
What is the Futures Broker thinking? Maybe it's goot to try to get an idea what we're really doing since we are on the other side of the negotiation with them. So I'll take a few guesses.

The broker wants to get some idea of my trades per month. They will be making a profit from my volume.

If it's true that most fail, then they must be figuring I won't last too long either, so they will want to lock in early profits before my trading demise.

If I've traded before and I have had at least one account, then I look a little better since another broker, their competition, has already profited from my trading. Or is my demise sooner?

The larger my initial deposit, then the longer I can trade for them, before my demise, and I'll likely have a larger volume of trades, so that's gotta be a big one. What trader is going to pull the plug on their trading before they've really killed the account? If I'm trading impulsively, then I'm not about to suddenly be disciplined and know when to quit....

What are their thoughts and motivations so we can be prepared, rather than how unprepared I was and I'm thinking perhaps many of us are currently, Ray mentioned during the webinar that there may be 10,000 traders affected.

For me this process of selecting a broker is the same logic as buying a car. During this selection process the relationship between me and a broker representative is the same as between me and a car salesman. My goal as a consumer is to get the best quality personal service, fastest stable data feed, and lowest cost. For the broker/rep the goal is to sign me up with the least time spent at the highest rate I am willing to commit to without hanging up the phone and going to the next broker. So whatever it takes to get me to sign up with the broker firm. Just like car dealerships, they don't like price shopping, and it's natural to keep prices 'slippery' for as long as possible as they try to fish out the highest rate you will live with. One broker rep. I spoke with this week gave me 3 different quotes for the ES in 15 minutes, and a 4th quote in a follow-up email the next day. The brokers rep. understands the commission rate is the bottom line from their perspective, that's where the real money is for them, everything else is viewed as an enticement to lock me into their product at the highest rate they can.

Unfortunately, on my side of the equation, I will never get a perfect 10 on all 3 requirements (service, feed, cost), I will have to compromise on at least one of those and hopefully not more than one. There are some wonderful small IIB's what I think of as boutique shops. They provide excellent personalized customer service, and typically a very good quality client experience overall. But that personalized service always comes at a cost. If I am trading 10 or 20 contracts a week, paying an extra $1 or $2 a Round Turn in order to have a better overall day to day customer experience is probably worth it in terms of piece of mind. But, the more round turns I do a month, the more important cost becomes. Once I cross above 50 or 100 contracts a week cost quickly becomes the most important factor. At that level of trading, I can overcome any feed quality / stability issue easily enough with a high quality and low fixed cost data provider such as Rithmic or IQ Feed, so I can remove feed quality from my consideration easily enough. It is a lot harder to overcome a $2 per contract 'feel good' overhead at that level of trading activity.


Last edited by trendwaves; January 12th, 2014 at 09:20 PM.
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  #23 (permalink)
Market Wizard
Boca Raton
 
Futures Experience: Advanced
Platform: Variety
Broker/Data: Optimus Futures, LLC
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For many beginner traders the concept of commissions and leverage (margin) stands out as the obstacle to success. Naturally, the more you pay the less profit you would make. However, down the road many realize that the real obstacle is really the development of a good method that works, where a quarter in commissions would not make the difference. Further, some charge inactivity, some charge liquidation fees, phone tech support, so there are other fees that could impact your trading. We try our best to give reasonable prices depending on frequency and deposit without some of the extras.

As you progress as a trader you realize that the broker could be a serious element in your success. We are not on the “other side”. We are on the same side! Those of us, who have been doing this for a long time, want our customers to succeed and invest a little more time into our customers so we don’t always have to chase new ones with marketing efforts. When we started our online trading efforts many discouraged me from getting into it, yet I saw a void. Most have become salespeople (brokers) of price. But, what I saw are a bunch of desperate guys trying to sell what their boss tells them to in order to meet a sales quota. We want to stay away from such efforts like a plague. The familiarity with the product and the support for it should be the key for this business.

When Successful traders switch brokers, it is not for the price but for many other reasons. From tech support (familiarity of software), speed of execution, risk management and the ability for the broker to come up with creative solutions to improve trading when this is discussed. The focus of an amateur and the professional from what I have seen is a world apart when seeking brokers. Pros don’t feel like they were taken if they pay a quarter more and try to sharpen their negation skills for the same round.

When you seek a broker my advice is find reasonable prices, someone who knows the software, could help you make smart decision when needed, offer solutions and someone you have chemistry wide and have an attitude of “Where everybody knows your name….”

Some will see this as the ultimate sales pitch, some will take this valuable advice to heart, as we all differ. Whatever it is, I wish you the best in trading.

Matt

PM with any questions about optimusfutures (800) 771-6748 (561) 367 8686. THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING.
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  #24 (permalink)
Banned: trolling
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sixtyseven View Post
Mike,

Timely post for me, as I'm an inexperienced trader and looking for a broker.

Another fee is money transfer in/out and the methods they use. Wire fees add up if that's your only option.

Anyway, the point of my post - what factors should the inexperienced consider. I'm looking into the following:-
- Fees
- Customer Service
- Clearing Agents
- Funds Segregation
- Available Products / Markets
- Supports Trading Platform
- Server locations

Anything else?
Thanks


@sixtyseven

the key is NOT the commission, but the intra-day margin rates...

at some time during your logical development and progression down the road to experienced emini futures trader, you will mature to the point of aggressive money management and protective yet aggressive risk management

here's the Holy Grail in simple terms...
https://futures.io/brokers-data-feeds/29928-zenfire-no-more-54.html#post380405

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  #25 (permalink)
Elite Member
Golden Bay, New Zealand
 
Futures Experience: Beginner
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kronie View Post
@sixtyseven

the key is NOT the commission, but the intra-day margin rates...

at some time during your logical development and progression down the road to experienced emini futures trader, you will mature to the point of aggressive money management and protective yet aggressive risk management

here's the Holy Grail in simple terms...
https://futures.io/brokers-data-feeds/29928-zenfire-no-more-54.html#post380405

I haven't really given margins rates much consideration, other than it means I need to hold less of my total account with the broker.
Surely you'll risk those 4 contracts, rather than 1 if it's within your risk tolerance? The difference in margin is neither here-nor-there in terms of total account size is the conclusion I've come to.

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  #26 (permalink)
Trading for Fun
New York, USA
 
Futures Experience: Master
Platform: NinjaTrader
Broker/Data: Mirus/Continuum//FuturePath/Rithmic
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sixtyseven View Post
I haven't really given margins rates much consideration, other than it means I need to hold less of my total account with the broker.
Surely you'll risk those 4 contracts, rather than 1 if it's within your risk tolerance? The difference in margin is neither here-nor-there in terms of total account size is the conclusion I've come to.

yes, that (margin) is a big factor that isn't often stressed. And also, the minimum account size, which at first glance, seems to not be so important, UNTIL, you realize (from this current situation) that I am going to need to have more than one broker, and, having more than one broker, also focuses on the aspects of *inactivity fees and *monthly fees since one of my current brokers may have a combination of broker/fcm/platform/data feed that I either like better or is working better over time than one of the other broker combinations that I have.

So I might actually approach those minimums on one of my broker combos and adding a few $20's a month, while not a big deal if I am profitable, makes me feel worse when I'm breaking even or struggling thru a down draft.

This current situation has opened up the eyes of traders and we are now compelled to be more active and proactive and empowered in our broker / fcm / platform / feed shopping. This is why they are not so happy since it makes the entire industry that they are a part of, look bad, once again, and that requires traders to require better deals and better service and a little deeper look into these deals.

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  #27 (permalink)
Banned: trolling
NYC + NY / USA
 
Futures Experience: Advanced
Platform: "I trade, therefore, I AM!"; Theme Song: "Atomic Dog!"
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sixtyseven View Post
I haven't really given margins rates much consideration, other than it means I need to hold less of my total account with the broker.
Surely you'll risk those 4 contracts, rather than 1 if it's within your risk tolerance? The difference in margin is neither here-nor-there in terms of total account size is the conclusion I've come to.

@sixtyseven,

it is completely logical, your response, as I already stated that what I shared was an advanced lesson, that takes quite some real-world experience to comprehend, respect, appreciate or utilize. One would never expect a grade school student to comprehend self seeding or self supervision as graduate students have, even in the initial years of college, it takes time to appreciate all the freedoms that age and responsibility confer. As to trading, leverage is everything (and we are not talking the TV series)! From the notion that one can earn $85,000 on a $200 long term risk on Wheat, Sugar, Cocoa, Corn, Soybeans or similar to the notion that for $300 / $400 / $500 one could trade one contract electronic mini-future instead of using $1,000 / $2,500 / $5,000.

Hey, its your money, until the grubby little hands of the broker gets a wiff that: "here comes another one!"


Last edited by kronie; January 13th, 2014 at 10:17 AM.
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  #28 (permalink)
Banned: trolling
NYC + NY / USA
 
Futures Experience: Advanced
Platform: "I trade, therefore, I AM!"; Theme Song: "Atomic Dog!"
Favorite Futures: EMD, 6J, ZB
 
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Posts: 798 since Oct 2009
Thanks: 216 given, 498 received


jaytrades View Post
yes, that (margin) is a big factor that isn't often stressed. And also, the minimum account size, which at first glance, seems to not be so important, UNTIL, you realize (from this current situation) that I am going to need to have more than one broker, and, having more than one broker, also focuses on the aspects of *inactivity fees and *monthly fees since one of my current brokers may have a combination of broker/fcm/platform/data feed that I either like better or is working better over time than one of the other broker combinations that I have.

So I might actually approach those minimums on one of my broker combos and adding a few $20's a month, while not a big deal if I am profitable, makes me feel worse when I'm breaking even or struggling thru a down draft.

This current situation has opened up the eyes of traders and we are now compelled to be more active and proactive and empowered in our broker / fcm / platform / feed shopping. This is why they are not so happy since it makes the entire industry that they are a part of, look bad, once again, and that requires traders to require better deals and better service and a little deeper look into these deals.

@jaytrades

its good to see you took this to the next logical level...

very good analysis

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  #29 (permalink)
Elite Member
Golden Bay, New Zealand
 
Futures Experience: Beginner
Platform: Sierra Chart
Favorite Futures: ES
 
Posts: 111 since May 2012
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kronie View Post
@sixtyseven,

it is completely logical, your response, as I already stated that what I shared was an advanced lesson, that takes quite some real-world experience to comprehend, respect, appreciate or utilize. One would never expect a grade school student to comprehend self seeding or self supervision as graduate students have, even in the initial years of college, it takes time to appreciate all the freedoms that age and responsibility confer. As to with trading. Leverage is everything! From the notion that one can earn $85,000 on a $200 long term risk on Wheat, Sugar, Cocoa, Corn, Soybeans or similar to the notion that for $300 / $400 / $500 one could trade one contract electronic mini-future instead of using $1,000 / $2,500 / $5,000.

Hey, its your money, until the grubby little hands of the broker gets a wiff that: "here comes another one!"

This grade school student needs more help to understand.

Assume a $50,000 total trading pot, with 1% risk ($500) on NQ with a 5 point SL. That requires $2,500 total margin @$500 per contract (minimum account balance of $2,500), and requires $10,000 @$2,000 per contract (minimum account balance of $10,000). Ok, I need to hold more funds in each broker account, and I could probably only fund 3 separate broker accounts, rather than say 15. But with $50k, that's probably ok.

With a $10k account balance I could get 5 contracts @$2,000 margin. With a $10k account balance I could get 20 contracts @$500 margin. But my total risk has gone from 1% ($500 per trade total risk) to 4% ($2,000 per trade total risk). This is what you are saying? Isn't that just poor risk mgmt?

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  #30 (permalink)
Trading for Fun
New York, USA
 
Futures Experience: Master
Platform: NinjaTrader
Broker/Data: Mirus/Continuum//FuturePath/Rithmic
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Posts: 80 since Jun 2011
Thanks: 22 given, 78 received


Yes, broker and trader are on the same side, except for that moment when they are on the opposite sides at the negotiating table before the partnership has started.

I got a heads-up moment after realizing some things about the shopping experience, which is why I'm posting here in the shopping thread.

It's only very recently that I've graduated from, "nearly dead, crummy, undisciplined losing trader struggling with the beginner psychology issues hump," to "ok, let's get on with the business of trading." The first guy wants cheap, the 2nd guy wants a solid business agreement that will last and therefore, is willing to take a lot of time and effort to shop for it.

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