Futures Trading Brokers

People using futures trading brokers can have confidence that they are licensed, trained, and expert in the securities field. Futures investing is both alluring and complicated. However, there are distinct differences between the security of the banking world and futures trading. In banking, deposits are guaranteed by the federal government. Whereas, stocks, bonds and other securities can go up or down in value. Investing in futures is not for the faint of heart. "Do not take a pair of millstones--not even the upper one--as security for a debt, because that would be taking a man's livelihood as security." (Deuteronomy 24:6)

The absolute best way to protect money that is put into the securities markets is by researching, analyzing, and asking lots of questions. Like most other brokers, a futures trading broker acts as an agent between a seller and buyer. The agent normally is paid by charging a commission; which is a percentage of the value of the transaction. The broker is expected to earn a commission by developing and maintaining the trust of the client. Then, once a relationship has been established, the agent is expected to advise the individual according to that person's desired investment needs. The job of the broker is to assist the buyers and sellers, by coaching and counseling them in making the most beneficial transactions. When done well, investing can be very fruitful.

In the case of licensing, futures trading brokers must acquire a license to act as a registered representative; according to the National Futures Association (NFA). The prospective licensee must sit for an exam called the Series 3. Administered by the Financial Industry Regulatory Authority (FINRA), it entitles the license holder to sell commodities or futures contracts. The educational aspects covered in the examination include the following ten categories: 1) Futures Trading Theory, 2) Orders, Accounts, Analysis 3) Margins, Limits, Settlements 4) General Speculation, 5) Basic Hedging, 6) Spreads, 7) Financial Hedging, 8) Financial Speculation 9) Options, and 10) Regulations. The examination is subdivided and graded in two parts. The first part, Market Knowledge, has 85 questions and is comprised of the first nine categories. The second part of the examination is developed from just one category; Rules and Regulations. This part of the exam has 35 questions and therefore is 30% of the grade on the examination. A passing score is 70% or better.

Furthermore, futures trading brokers must take course in ethics and anti-money laundering. Established in 1989, the Institute For Financial Markets (IFM) is an independent, nonprofit foundation which focuses on education. Some of the course offerings of IFM include: Initial /New to Industry Ethics Training, Periodic Ethics Training, and Anti-Money Laundering (AML) Compliance. The initial course in ethics incorporates legal requirements, regulations, and sound judgment aspects involved in making transaction execution decisions; dealing with conflicts of interest; marketing and advertising, and educating clients. It also covers the licensee's obligation to the public, industry relationships, proper disclosures, and appropriate handling of funds.

Built upon two hypothetical case studies that take place in different securities firms, this 2nd course in ethics (for futures trading brokers) covers law, regulation, professional ethics and sound judgment. The core of the program involves determining what constitutes suspicious behavior by a prospective client, how to handle pressure to rush the approval of opening an account, what to do when there is a questionable financial purpose for opening an account, soliciting new clients, how to operate on the internet, proper disclosures, as well a other related topics. As for the AML course, all manner of money laundering and their hazards within the securities industry are uncovered. Learning the regulations designed to detect, monitor, and prevent criminal actions is the primary function of this course. Sharpening the skills of the registrant in their daily activities and in the future conduct of the futures business is the goal.

In addition to the educational requirements, all futures trading brokers associated with a company engaged in the buying and selling of securities (including partners, officers, directors, branch managers, department supervisors, and salespersons) are mandated to register with FINRA. Commissioned by the U.S. Congress in 1938, FINRA is a membership self-regulatory organization (SRO) that regulates the securities markets for the peremptory advantage and safeguard of the investor in securities transactions. FINRA determines the strategic objectives and policy dictums of the organization, manages and supervises the effectiveness of each component organization, and makes sure that all organizational statutes and regulations are actualized.

Even after all that education, some futures trading brokers are a disappointment to their clients. There are a great many customers that feel forsaken once the broker gets their initial commission check. The promises to learn about the client's individual needs are often tossed aside once the person sign's on the dotted line. The Securities and Exchange Commission (SEC) is the body of government that protects investors against unsavory practices in the securities markets. They are charged with maintaining fair, orderly, and efficient markets. In their role they have created the Office of Investor Education and Advocacy to serve the needs of investors. All futures trading brokers are expected to do a good job in order to earn their commissions. These agents are expected to give detailed and sage advise to their clients. Analyzing details about the commodities markets and trends will help the client make a decision that they think will be the best for them. When the broker does his or her job well, the client has a better chance of improving their financial portfolio. There is no magic to these types of transactions. Remember, there are no guarantees. But, futures trading brokers can give a person better odds.

Futures Trading Software

A futures trading software program can be a valuable tool, but nothing is a suitable substitute for skill and experience when it comes to trading futures and financial markets. Although, trading may be risky, it can also be highly lucrative for those who do know how to work the markets. Basically, futures are contracts for a specific commodity to be bought or sold for delivery at a future date. This type of money-making venture is based on speculation and timing, and it requires a great deal of skill and knowledge about the financial and investment world. Speculation is nothing more than conjecture. When speculation is applied to buying stocks, bonds, commodities, or real estate an investor is hoping to take advantage of an unexpected and sudden rise or fall of prices to make profits. Savvy investors know that taking risks and investing at the right time can lead to huge profits. On the other hand, great monetary losses can also be incurred. Knowing the risks and how to work the markets can minimize the dangers but cannot eliminate them all together. In fact, all types of trading depend entirely on the existence of risk. Large profits and risk form a symbiotic relationship. If the markets stayed flat and risk free, the chances of making huge profits in a short time period would be eliminated. Investors take a calculated risk based on what they've learned from the past.

Properly designed futures trading software can not only follow market trends but forecast them as well. Software will also analyze the markets. Before paying a thousand dollars or more for software, research the many types available. Unfortunately, much of the stuff available for purchase will be useless. The owner or program developer will talk a good game, but when it comes down to actually making money the program won't measure up. "Beware lest any man spoil you through philosophy and vain deceit, after the tradition of men, after the rudiments of the world, and not after Christ." (Colossians 2:8) Obviously, the basic principles of this world are of gaining riches and wealth. Many programs will promise quick and easy money. Don't be taken in. The main point of this entire article is that futures are risky and will always be that way. Therefore, futures trading software might reduce the risks, but even the modern technology is not an effective countermeasure against a lack of knowledge or skill.

Investors will often use credit or borrowed funds in the hopes of gaining large profits. Some business people say investment markets can be unpredictable and volatile. Because of the risk involved with futures markets a business related term is often spoken in the financial world: risk capital. Sometimes risk capital is referred to as venture capital. Generally speaking, a venture is a dangerous endeavor in which there is a risk of loss as well as chances for profit. So, not only must a person have sufficient risk capital, but they must also be venturesome and not afraid to lose money. An online search indicates that very few people make money in the futures market even with futures trading software. In fact, one online source places the percentage of new investors that lose money as high as 90 percent. Those people drop out of the market, but the remaining 10 percent of investors do make regular profits. Research also indicates that it's difficult or impossible to make money on every trade. Some things that can help are to make a plan and be aware that not all trades will make money. Analyze every trade, keep detailed and accurate records of trades, and don't repeat mistakes that lost money. Knowledge and hard work are essential to success.

Most futures trading software programs can analyze and plan out tactics and strategy. Any software should at the very least be easy to use. Optimally, the software program should track both futures and commodities options. The software program should be designed to maintain trade record accuracy, track orders, handle multiple trades, and check broker statements for errors. Additionally, the program should be able to analyze market statistics. Generally speaking, an adequate futures trading software program replaces the old-fashion paper and calculator method. After analyzing market trends, the program should help create a trading strategy and develop a contingency plan for when trades go wrong. Futures software can also help determine how much money to risk and how many contracts to take on at once. Another beneficial aspect of the program is determining how much money is at risk if a trade does go wrong. Going beyond risk, the program should warn the trader of when to get out of the futures market.

According to one online trading site, futures trading software can help with preparing charts. Traders must create charts to make market analysis easier. Not surprisingly, strict rules govern commodity options trading. A cash commodity is defined. Basically, a cash commodity is a raw and undeveloped asset such as copper, soybeans, cattle, or cotton. Going on that standard, copper is a commodity, but copper wiring and piping is not. Also, any perishable commodity such as wheat, rice, or corn must have sufficient shelf life which allows ample time for it to be processed and delivered to the consumer. More importantly, a commodity's price has to fluctuate enough so as to create market uncertainty. This is actually how money is made or lost. In closing, futures trading software might make some sense or order of the market fluctuations, but don't depend on the program to eliminate all risks. Don't be fooled. Money will be lost. It's the nature of the business.

Copyright© 1996-2015 ChristiaNet®. All Rights Reserved.