Futures trading is complicated business, even for experienced investors, and so is shopping for a brokerage firm to use for futures and commodities trading. It’s not just about commissions and customer service (although both are important factors to consider).
Trading in futures requires using a brokerage that offers certain kinds of investing tools, research and data that are different from those you’d seek in a company to house your IRA or roll over your 401(k). Here, you’re looking for the highest level of real-time data and quotes, an intuitive trading platform, an abundance of charting and screening tools, technical indicators and a wealth of research — plus the ability to leverage your account with reduced day-trading margin requirements. All of that, and you still want low costs and high-quality customer support.
These are the features and services we focused on in our rankings, concentrating on the world of online discount brokers that serve self-directed traders (not pros) seeking to quickly execute their own futures strategies.
One note before we dive into the top-ranked brokers for trading futures: Investing in futures is a strategy that earns a few caveats from NerdWallet. It comes with risk, as do all investing strategies. But futures trading is even riskier: You’re making a bet on the direction a market is going to go, an outcome that is difficult for even professional analysts to forecast. In other words: You can do a lot of research, feel confident in your prediction and still lose a lot of money very quickly.
If you’re new to futures trading and want to dabble in this strategy, you should understand how to trade futures, determine the risks involved, and have your financial bases covered.
The best online brokers for trading futures overall
TradeStation and Generic Trade do a good job of serving two different types of futures traders.
- See our TradeStation review.
- Commission: $0.25 – $1.20 per contract, per side + exchange and NFA fees
- Day-trade margin: 25% on select contracts; none on most contracts
- Account minimum: $5,000
- Futures products: 80+
- Trader support: 24-hour phone support from Sunday 3:30 p.m. to Friday 6 p.m. Eastern
- Promotion: 20% off commissions: up to $500 for accounts under $100,000, to $1,500 for $250,000 or more
- See our Generic Trade review.
- Commission: $0.59 per contract, per side + exchange and NFA fees
- Day-trade margin: 25%
- Account minimum: $0
- Futures products: 50+
- Trader support: 24/7 phone support
The best futures broker should have the tools you need to research, test, customize and quickly execute your trades, round-the-clock customer service (access to a trading desk for after-hours support), reliable technology, and reasonable commissions and day-margin rates. That’s a tall order for any single broker to fill. Then again, the best futures broker for you may not need to check all the boxes as long as it excels in the areas of service that matter most to you.
In the sections below, we highlight the standout firms in various categories. It’s hard to crown one as the futures trading MVP of the bunch, but both Generic Trade and TradeStation come pretty close.
Each excels in different ways: TradeStation is a strong choice for seasoned tech-savvy futures traders. It started out as a platform solely for use by professional traders as is clear by the breadth of markets covered, data offered, and the range of trading options, research and customizable tools at each client’s fingertips. That said, traders pay more to access such high-caliber offerings. Generic Trade — a futures- and options-only brokerage firm — stands out as a “nothing fancy” lower-cost entree into futures and options trading. To see if its bare-bones approach suits potential customers, the company offers a two-week demo account to fully test-drive the service before making a commitment. Generic Trade charges a flat $0.59 per-contract, per-side commission, has a $0 account minimum and no inactivity fees, and provides a decent futures trading platform and selection of tools and research. Also worth a closer look in the “Best Overall” category is E-Trade, which falls somewhere between the two on the low-end/high-end spectrum.
Low-cost brokers for futures trading
Based on commissions, fees and other costs that add to the futures trader’s bill, bargain shoppers should consider these brokers.
- Commission: Tiered: Over 2,000 contracts/month: $0.45 per contract, per side; 251 to 2,000 contracts: $0.65; up to 250 contracts: $0.85 + exchange and NFA fees
- Day-trade margin: 25%
- Account minimum: $500
- Futures products: 50+
- Trader support: 24-hour phone support from Sunday 5 p.m. to Friday 8 p.m. Eastern
- Commission: Tiered: 100,000+ contracts/month: $0.25 per contract, per side; over 50,000: $0.30; over 10,000: $0.35; over 2,000: $0.45; over 500: $0.50; less than 500: $0.60 + exchange and NFA fees
- Day-trade margin: 25%
- Account minimum: $10,000
- Futures products: 60+
- Trader support: 24-hour phone support from Sunday 8 p.m. to Friday midnight Eastern
Futures trading can become costly quickly. Investors can be subject to platform fees, data-feed fees, minimum-activity fees and fees to access premium reports and other research. Not even trading commissions — which all brokers charge “per side” (first when the contract is bought and again when it’s sold) — are easy to decipher. For example, what’s not included in most brokers’ advertised “per-contract” commission are two standard fees: An exchange fee (which varies depending on the futures exchange used to make the trade) and a $0.01 per-side assessment fee paid to the National Futures Association (NFA), the industry’s self-funded regulatory body.
When companies cut costs for one service they often make up the difference elsewhere, typically by charging platform and data fees. Here’s where MB Trading (which was purchased by TradeKing last year) and Lightspeed Trading stand out by offering reasonably priced service all around. Both brokers have tiered commission schedules based on monthly volume. Lightspeed’s commissions (not including the aforementioned exchange and NFA fees) range from $0.25 for high-rollers with 100,000 monthly contracts to $0.60 for those dealing with less than 500 per month. The range at MB Trading is $0.45 per contract for more than 2,000 contracts to $0.85 for 250 and fewer. Customers get free access to all the bells and whistles on the company’s desktop, web and mobile platforms. It charges extra for data, but that is a reasonable $10 to $15 a month, depending on the data selection. Lightspeed customers also have free access to its Livevol X and WebTrader platforms where Level 1 quotes are free.
Best trading platform, research and tools
These brokers offer the highest level of real-time data and quotes, charting and screening tools, technical indicators and a wealth of free research.
- See our TradeStation review.
- Commission: $0.25 – $1.20 per contract, per side + exchange and NFA fees
- Day-trade margin: 25% on select contracts; none on most contracts
- Account minimum: $5,000
- Futures products: 80+
- Trader support: 24-hour phone support from Sunday 3:30 p.m. to Friday 6 p.m. Eastern
- Promotion: 20% off commissions: up to $500 for accounts under $100,000, to $1,500 for $250,000 or more
- See our TD Ameritrade review.
- Commission: $2.25 per contract, per side + exchange and NFA fees
- Day-trade margin: 25% with $15,000 minimum
- Account minimum: $1,500
- Futures products: 60+
- Trader support: 24/7 phone support
The only brokers that qualified for our best futures trading platform category were those offering advanced research, analytics, charting and screening tools, lots of technical indicators and free access to studies, a variety of streaming news and research as well as automated futures trades. Four brokers met all the criteria: Interactive Brokers, OptionsHouse, TradeStation and TD Ameritrade’s thinkorswim platform. But the last two stand apart.
TradeStation’s desktop platform is aimed at tech-savvy retail and professional traders seeking a luxury-class experience. Its array of features includes one-click order entry, automated trading strategies, 24-hour global market analysis, 48 years of historical futures market data and the ability for investors to design their own trade-strategy customizations. Access comes at a price, however: $249.95 a month for a subscription to the software for nonprofessional traders.
TD Ameritrade’s thinkorswim platform is geared more toward the retail investor, but that doesn’t mean it is lacking. The platform is known for its deep bench of free technical studies and research, and reports (including ones offering insights from prominent investors in the futures trading industry) and access to live futures pit audio.
Both firms offer one-click order entry, ample technical indicators (160-plus at TradeStation and 100-plus at thinkorswim) and access to trading specialists when you most likely will need to get in touch.
Low day-trading margin requirements
Traders who want the most leverage will appreciate the low day-trade margins at these brokers.
- See our Generic Trade review.
- Commission: $0.59 per contract, per side + exchange and NFA fees
- Day-trade margin: 25%
- Account minimum: $0
- Futures products: 50+
- Trader support: 24/7 phone support
- Commission: Tiered: Over 2,000 contracts/month: $0.45 per contract, per side; 251 to 2,000 contracts: $0.65; up to 250 contracts: $0.85 + exchange and NFA fees
- Day-trade margin: 25%
- Account minimum: $500
- Futures products: 50+
- Trader support: 24-hour phone support from Sunday 5 p.m. to Friday 8 p.m. Eastern
Futures contracts are highly leveraged: You can put down a small amount of money — generally 5% to 10% — on a large contract. That sounds like a good thing, and it is. But it also adds to the risk: Leverage can lead to bigger gains and bigger losses, and if your account dips below the maintenance-margin requirement, your broker may issue a margin call that requires you to add funds immediately. That means you need money available above and beyond any positions you hold.
The initial overnight margin requirement will be set by the exchange and it doesn’t vary by broker. But futures contracts are often bought and sold within the same day, and some brokers offer a reduced margin requirement for day trades; generally a percentage of the initial margin requirement. If leverage is important to you, Generic Trade and MB Trading/TradeKing both offer 25% day-trade margins and some of the lowest minimum-balance requirements available for a futures trading account. Generic Trade also offers an Enhanced Intraday Margin System on request; this is available during limited trading hours for seasoned traders who maintain a $1,000 balance and may reduce the margin requirement even further. (Lightspeed, mentioned above, also offers 25% margin, albeit with a higher account minimum.)
The best futures brokers for trader support
These brokers offer phone support around the clock when futures markets are open, in addition to online educational resources and demo accounts.
- See our TD Ameritrade review.
- Commission: $2.25 per contract, per side + exchange and NFA fees
- Day-trade margin: 25% with $15,000 minimum
- Account minimum: $1,500
- Futures products: 60+
- Trader support: 24/7 phone support
- See our OptionsXpress review.
- Commission: $3.50 per contract, per side + exchange and NFA fees
- Day-trade margin: 25% to 50% depending on contract
- Account minimum: Set on a case-by-case basis
- Futures products: 100+
- Trader support: 24-hour phone support from Sunday 5:30 p.m. to Friday 5:30 p.m. Eastern
- Promotion: 50 commission-free trades for a new account funded with at least $5,000 transferred from another firm.
We’re assuming you’re an experienced trader; if you’re not, click away because futures trading is not where you get your start.
But even experienced traders need assistance: It can take time to adjust to a new trading platform, and many of the best ones are so advanced that even the most-active traders could use a road map. You also may want to call and speak to a trading desk, or place broker-assisted trades occasionally — either to transact when you’re away from your computer or discuss a strategy with a like-minded person.
All of that means you may want a futures brokerage that has expert traders available during futures hours, which are different from standard trading hours: Look for 24-hour service from Sunday afternoon through Friday evening.
OptionsXpress and TD Ameritrade both excel in their trader support, with around-the-clock qualified brokers, free seminars, lots of online education and virtual-trading capabilities, so you can practice strategies with no risk. OptionsXpress reviews and approves accounts interested in futures trading on a case-by-case basis, evaluating on factors such as trading experience, income, net worth and investment objective. The trade-off: You’ll pay more in commissions at both brokers, but data and trading platforms are free.
Best brokers for trading futures and commodities: summary
|
Broker
|
Best
for |
Highlights
|
Commission
|
Account minimum
|
Start investing
|
|---|---|---|---|---|---|
|
|
Overall
+ Platform |
Volume discounts for frequent traders; pro-level platform
|
$0.25 - $1.20 per contract, per side
|
$5,000
|
|
|
Overall
+ Low day-trading margin |
Flat commission; 25% intraday margin requirement
|
$0.59 per contract, per side
|
$0
|
||
|
|
Low cost
+ Low day-trading margin |
Volume discounts for frequent traders; no platform fees
|
$0.45 - $0.85 per contract, per side
|
$500
|
|
|
|
Low cost
|
Volume discounts for frequent traders; free access to select platforms and data
|
$0.25 - $0.60 per contract, per side
|
$10,000
|
|
|
|
Platform
+ Trader support |
24/7 phone support; free platform, research and data
|
$2.25 per contract, per side
|
$1,500
|
|
 |
Trader support
|
Virtual trading; free seminars and online education
|
$3.50 per contract, per side
|
Accounts approved for futures trading on case-by-case basis
|
Dayana Yochim and Arielle O’Shea are staff writers at NerdWallet, a personal finance website. Email: dyochim@nerdwallet.com and aoshea@nerdwallet.com. Twitter: @DayanaYochim and @arioshea.
from NerdWallet
https://www.nerdwallet.com/blog/investing/best-online-brokers-futures-trading-commodities/
No comments:
Post a Comment