Choosing a Futures Broker for Day Trading

I remember how, just 14 short years ago, I had the dream to become a futures trader, but very little knowledge to back up my enthusiasm and passion. I had traded shares, of course, but that had simply involved ringing up the local broker, chatting with him about what was hot and what was not, and then placing an order through him for the requisite number of shares. When I needed to buy something, I'd give him a call and sell some, hopefully at a profit.

But things were beginning to change. Online discount brokerages were gaining traction, and I soon realized that I needed to choose one of those. I wanted to avoid the middleman, I wanted to be self-directed, and I wanted to keep my costs down.

In those days, the online brokerages merely automated their earlier process of taking telephone calls. So you would submit your order online and it would be manually picked up by one of the brokers who submitted it to the exchange for execution by a trader in the "pit". It was faster than before, but still took several minutes - an eternity for a day trader.

How things have changed!

Now the best brokers offer a sophisticated "trading platform" which gives you, the home-based retail trader, the same sophisticated facilities and services that used to be the exclusive domain of trading professionals. When you submit an order online, there is no intermediary required. It is flashed instantly to the exchange and executed immediately without human intervention. The trading pits are still there, but they are increasingly being replaced by electronic marketplaces.

Back then, different brokerages specialised in shares, options, futures or Forex, but nowadays a single brokerage will handle it all. They used to be restricted to their domestic market, but now they are connected to the world. It is easy for me, living in Australia, to trade commodities in London through my US broker.

So choosing your broker has become a different equation to what it was just a decade ago. Then it was a struggle to find one that supported the products you wanted to trade and the style of trading you wanted to do. Now most good brokerages meet your basic requirements, and you are looking for an excellent trading platform, a competitive fee structure, financial stability, efficient execution and good customer service.

The trading platform is a significant form of differentiation between competitive brokers. As well as the ability to enter orders, you want sophisticated charting capabilities, financial news services, efficient account reporting and a host of other value adding features.

Despite the wider choice, or perhaps because of it, choosing a broker is still a difficult decision for a beginning trader. A good way of getting a really good look at the way top brokerage companies stack up against one another is to read an authoritative independent review (I have suggested one good source in the video link at the end of this article). Furthermore, most brokers provide a free demonstration account to assist your evaluation.

If you are an international trader, you do not need to be limited to brokers in your own country. With the increasing internationalization of trading, you should focus on working with the broker who offers the best facilities and prices for the kind of trading you will be undertaking, regardless of country of origin. At various times over the last dozen years, I have traded from New Zealand, the UAE and Australia, always working through my U.S. broker.

Once you have researched the competitive websites and settled on your broker of choice, the next stage is to open a trading account. It is not difficult.

Just like opening a bank account, it takes a bit of time and you do have to be prepared to sign a lot of paperwork. The brokerages are highly regulated - as you would wish - and they have to make sure that you fully understand and accept the risks involved in trading activities. Furthermore, in these days of heightened security concerns, the brokerages are obliged to "get to know" their client to avoid money-laundering and other illegal activities.

The good news is that the paperwork can be completed online, so it is a relatively speedy process. You may need to scan some documents (for example, your passport or a utility bill in your name) and transmit them with the application.

When the application is accepted, you are notified by e-mail and provided with account login details. You can log in to your account and look around, but you will not be able to trade until the account is funded.

Funding is simple. You can normally deposit and withdraw funds with an electronic bank transfer, even if you are in a different country. You can also transfer funds from another broker. A simple online request (with the appropriate security protection) can initiate a funds transfer, anywhere in the world.

Once the account is funded, you are ready for action. As you buy and sell commodities, you will see your account balance adjusted in real-time to reflect your current financial position. You can request detailed trading reports covering days, weeks, months or a full financial year. (This makes the accounting side of your trading business very simple.)

In the video I introduce typical facilities provided by a brokerage, using my own broker as an example. My choice of broker was guided by the fact that they consistently rate highly in comparative surveys, they have a very competitive fee structure, and I have found their customer service good. I am comfortable with my choice, but I know that other top-flight companies are equally competitive

Share Trading In India For Beginners - Basic Requirements To Get Started

There are a few basic requirements that need to be in place before an individual can start the process of buying, holding and selling shares. This document is a basic guideline to explain these requirements. Please note that this document does not provide any advice on what shares to buy or what investment strategy suits an individual. This is a getting started guide for individuals based on my own experiences.

The 3 basic things needed for getting started are:

* Dmat Account

* Trading Account

* Bank Account

Dmat Account

A Dmat account is like a Bank Account, with the difference being that instead of cash, a Dmat account holds shares. So, if shares are bought, they are deposited into the buyers Dmat account and if shares are sold, they are reduced accordingly from the Dmat account. The shares that are deposited to or reduced from the Dmat account are electronic shares. For an individual wishing to trade in shares, it is compulsory to trade only in Dmat (dematerialized) shares. Physical shares cannot be traded. Dmat shares have many advantages in terms of ease of handling etc.

A Dmat account can be opened through most banks and financial institutions, after filling up the required forms and providing identity and address proofs. The usual charges associated with a Dmat account are:

1. Account opening charges

2. Yearly charges for maintaining the Dmat account

3. Recurring periodic charges for holding shares in the Dmat account

4. Other service charges based on transactions carried out. Usually, there are no transaction / service charges when shares are bought. The charges will be levied when shares are sold.

The above charges may not be the same across different service providers but a big part is likely to be the same as regulatory agencies like Securities and Exchange Board of India (SEBI) specify certain norms.

Trading Account

A Trading account is required if an individual wishes to trade, i.e. buy and sell shares in the stock exchange. The 2 main stock exchanges in India are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). A Trading account can also be opened with most banks and financial institutions, after filling up the required forms and providing identity and address proofs. The actual trading can be done by phone, internet or using transaction slips that are provided at the time of opening the account. Personally, I have found buying and selling using the internet fairly convenient. There are options to specify the price at which to buy or sell and it is easy to track the status online.

There is a brokerage charge that is incurred for both buying and selling of shares. This charge varies across different trading houses. Also, government levies like the Securities Transaction Tax (STT) will be incurred on such transactions.

Bank account

Needless to say, a Bank account is required for carrying out various financial transactions associated with trading of shares. This is where the money on sale of shares will be credited or money for buying shares will be debited from. A normal Savings Account is enough and nothing additional needs to be done with the Bank account.

Trading process

Once the Dmat account, Trading account and Bank account are in place, an individual is ready to start trading. While it is not necessary to have the Dmat account, Trading account and Bank account with the same organization, I feel that having it with the same organization offers additional convenience, especially for individuals trading using the internet. The following example of buying and selling using a Trading account on the internet illustrates the convenience of having the Dmat account, Trading account and Bank account with the same organization.

Buying shares: When an individual wants to buy a share, he/she logs into the Trading account and specifies the details like the Company name, no. of shares to buy and the price at which to buy. Depending on this information, the required amount from the Bank account is set aside for this trade. When the desired price is reached, this trade is executed and the amount (after adjusting for charges) is debited from the Bank account and the shares are credited into the Dmat account. 
If the Bank account had been with a different organization, then for carrying out this trade, it would have been necessary to move the amount into the Trading account.

Selling shares: When an individual wants to sell a share, he/she logs into the Trading account and specifies the details like the Company name, no. of shares to sell and the price at which to sell. Depending on this information, the required no of shares from the Dmat account is set aside for this trade. When the desired price is reached, this trade is executed and the shares are debited from the Dmat account and the amount (after adjusting for charges) is credited to the Bank account. 
If the Bank account had been with a different organization, then after this trade, it would have been necessary to move the amount from the Trading account into the Bank account.

Please note that apart from the charges that are levied by the Bank, the Dmat account service provider and the Trading account service provider, there will be additional government taxes like STT and Service Tax. Also, please make sure to read all the terms and fee details of the service providers before opening any account and be aware of the transaction costs involved with each transaction. Happy Trading!

What Are Electronic Communication Networks (ECN)?

Today everyone who's involved in operations on the US stock market knows about ECNs. But there are not many people who really understand the basic principles of ECNs. This article explains the most important things about ECN systems.

ECN is an automated computer trading system. The first ECN was INSTINET - a trading network established in 1969, long before the term ECN appeared in dictionaries. Most of the other ECNs (ISLAND, REDI, ARCHIPELAGO, BLOOMBERG, BRUT) have been built on the principles of the first ECN - INSTINET. New rules of order execution became a catalyst for the intensive ECN's development. New rules were approved after a long discussion in the investors' community, as well as in brokerage houses. The main goal of the new rules was the modification of the existing order execution algorithms so that every investor could get the best possible price by an order submission, whether he buys or sells shares. New rules were to terminate all market-makers' opportunities to gain extra profit from unfair order execution. ECNs manage this task in the best possible way. By the way, ECNs allow working on the stock market without market-makers more efficiently.

The first task of ECN systems is to execute buy orders by sell orders of equal volume. This process goes automatically, for example, if the system receives a sell order for 1000 shares of XYZ Inc. at $10 per share, it will look for the same buy order (i.e., the same amount of shares at a particular price).

Automated search of two equal orders is the fastest and the most effective way of fulfilling orders. By the way, FIFO execution principle (First In First Out) guarantees individual investors a fair execution not depending on personal trading volumes.

So, today ECNs work as a quasi-stock exchange. If an opposite order is not found in the system, an ECN uses the same algorithm as the NASDAQ does: it transfers the best available bid and offer to the NASDAQ. NASDAQ's Level 2 information screens show this quotes under the name of the ECN. When the bid or offer of the ECN becomes the best among available on the NASDAQ, anyone who is following NASDAQ quotes, enters his opposite order at the same price which leads to the execution of the order, originally entered in the ECN.

Thus, ECN fulfills two functions: it is an electronic quasi-exchange and a market maker in the trading system NASDAQ. Under the rules of the Securities Commission (SEC), ECNs can be registered as an electronic stock exchange, i.e., they are officially recognized as stock exchanges.

ECNs' advantages

The main advantages are: anonymity, automated order execution and low costs. Buyers and sellers can put their orders into ECN and not worry that information about their activity will affect the market. There is completely no human factor in order execution, so far the electronic system accepts and executes all orders. ECNs not only speed up the trading process, but also spare investors money: they do not try to make extra cash on the difference between the price in order and the actual market price just like it happens on the way "broker-NASDAQ market-maker".

Today many ECNs expand trading time by adding several trading hours before and after an open market session. It is obvious that in the near future trading through ECN will be available round the clock.

ECN's disadvantages

Trading in ECNs is extremely efficient if you trade highly liquid stocks that have a lot of one-time buy and sell orders. That increases the probability of the presence of two active opposite equal orders in the system. It may be not a very good idea to trade less liquid stocks in ECNs. In this situation it's better to send your orders to traditional market-makers of the NASDAQ.

By the way, the same shares can have different liquidity level in different ECNs.

How Forex Trading Works

Forex trading involves the trading of one currency for another. It is known by many names, including the "foreign exchange trading market," "FX trading," and "currency exchange." The trades occur between any and/or all of the following participants: 

·         Large and central banks

·         Governments

·         Multinational corporations

·         Other financial markets

·         Currency speculators

According to the worldwide central bank organization, The Bank for International Settlement (BIS), the trade in the global Forex and related markets, on an average daily basis, is over $3 trillion. To put this into perspective, this is more value than the NYSE, the Dow, the S & P 500, and all of the other U.S. stock markets combined! Forex trading is done all over the world, and there is very little to no actual cash changing hands when these transactions are completed. There are several notable differences between Forex trading and stock market trading. The Forex market is in operation around the clock. It opens on Sunday evening and closes on Friday evening. Forex trading takes place across three continents, which allows traders to instantly react to any events or any fresh developments that occur across the globe. The stock market opens for a set number of hours (7:15 A.M. to 5:15 P.M. GMT for the London Stock Exchange) during weekdays. This only allows traders to react to events across the globe during hours of operation. Both competition and electronic trading have resulted in a drastic reduction in the bid-offer spreads, which are equivalent to commissions. The spreads for major stocks can remain low, but often increase when the liquidity of a specified currency falls.

While online stockbrokers have reduced commissions, most consider the Forex market to have the lowest levels of commission in relation to trade size of any financial market. This is partly due to the fact that most trading houses offer 100:1 leverage. This means that a client who puts down a $100,000 deposit can leverage it into $10 million. Another important difference between Forex trading and stock market trading is that retail clients, or individuals, do not have access to almost identical prices as the other participants. There are many different access levels, which result in a range of commission costs or spreads. Only the largest investment banking firms, such as Citi and Deutsche Bank, receive very tiny spreads (i.e. the difference between bidding and asking prices is very small). This is not a well-known fact. It is considered a carefully guarded secret amongst those closely involved in the world of international finance. The further along the trading chain you go, the larger the spreads become. Essentially, the larger the number of trades you make, the smaller the spread is. This is why only the top firms in the Forex market get the smallest spreads. Increasingly larger spreads are provided to small investment banks, major multinational corporate giants, insurance firms, pension funds, and leading retailers. In fact, major retailers were only recently allowed to participate in the Forex market, and they're only allowed to do so through banks or brokers. The value of currency is greatly influenced by many factors, but the Forex market itself is mostly a supply and demand market. If demand rises or if supply falls, prices will rise. On the other hand, prices will fall when demand falls or supply rises. This is the essence of the Forex market and Forex trading.

Know the Basics of Share Trading

Often people are found rushing in to some kind of trade without learning its basics. And what is the result? Well, most of them face losses. It is always advisable to learn a trade, its basics and its tricks before actually putting your money on stake. In case of share trading people want to buy the shares at the lowest prices and at the time of selling they choose to sell at the highest prices. This is the main concept of this trade. This kind of trade requires the traders to work with proper planning and strategies. There is guessing required in this market. People who work on the basis of their intuition often find themselves bearing losses. It is always better to take calculative steps in trading of shares. Normally people work as per the trend of the market. It is very important to understand the trend and know how to do trend analysis. Every time an investor can not ask another investor to help him. In fact, why would someone help you? One should know everything which is part of the basics list before entering the market for share trading.

There are many people who have built fortunes from this market and at the same time there are many people who have ruined their empires. Like any other type of trading, there is risk involved here. If you buy shares at a particular price and you are able to sell these shares at a higher price then you can earn profit however in a case where you have purchased few shares and now the price is not gong up at all, and you end up selling them at a lower rate, you will face direct losses. In case of share trading, there is a neutral situation as well. It emerges when a person sells shares at the same rate at which he bought these shares. A person needs to contact a broker in case he wants to start off in trading for shares. Today most of the people engage in electronic transaction as it is not time consuming as compared to going to the exchange floor. Apart from this, if a trader opts for electronic transactions then he can do his transactions in more efficient manner.

As a new trader, one should study about a company's performance before buying its shares. There should be consistent performance of that company or that company must in develop stages. If you are a shareholder and want to earn profits through this kind of market, you should study the daily quotes of different brands and keep yourself in touch with what is happening in the share market.

Why Day Trade the DAX When There Are Alternatives?

You may be wondering: Why day trade the DAX when you could make much more profits by accessing other programs? For Americans this is the equivalent of the Dow. It is comprised of the 30 largest companies in Germany which are assessed for capitalization and then weighted to give investors an indicator of how stable their money is going to be if they join.

The Prime Standard is the template for the Frankfurt Stock Exchange. Book volume and market capitalization represent the best measure of commercial competency. An electronic trading system known as XETRA is responsible for generating prices. Why day trade the DAX formula? It is based on performance over a given total return. The assumption is that cash distribution and dividends are invested into the index.

A pathway to the European Union markets 
Germany is by far the most dominant economy within the EU thanks to its remarkably resilient manufacturing base. As a word of warning do not try to utilize the Dow Jones lot statistics because they are different in Europe. You could end up with significant losses. It is also advisable to sign up for the Eurex data feed which will cost you in the region of $9.00 per month.

Why day trade the DAX on a consistent basis? It gives you fairly good returns and it is operated from a country with proven economic stability since World War II. The symbol for the exchange is FDAX. Under the contract value one point is equivalent to twenty five Euros. The EURUSD exchange rate hovers between 1.25 and 1.50 depending on the metrics.

That means that each point will be equivalent to about $34.00. The incremental rises are staggered at 0.5 of a point or 12.50 Euros. Each tick is equivalent to $16.90 on average. Why day trade the DAX contract months? They offer variety since they run on YM and ES. That means that you can run through December, March, June and September. The trading hours are between 12.50 am and 3.00 pm Central Time.

Critical information about the exchange 
It must be noted that this is a gigantic contract which is worth about $225,000. This is greater than emini which comes in at $72,000. The S&P is slightly higher at $369,000. Why day trade the DAX on a daily basis? You require an overnight margin of 12,900 Euros which is about $17,415. On the other hand the intraday margin lies between $2,000 and $5,000.

A low margin on the DAX means that you are more susceptible to risk factors. The combination of liquidity and volatility can be toxic if you have not taken the time to deal with it. Why day trade the DAX? You should go for this option because it offers relative stability over the long run.

Advantages of Trading the E-Mini Futures

S&P 500 E-mini futures i.e. Electronic Mini S&P 500 futures refers to the electronically traded futures contracts. This was first launched by the Chicago Mercantile Exchange on September 9th, 1997. E-mini futures or just E-mini as they are often named, are smaller sized contracts. The main purpose of launching E-mini futures is to attract investors to trading the stock market index futures. E-mini refers not only to the index but also the 500 companies that have their common stocks included in the index itself.

E-mini is one fifth of the size of the standard SP 500 futures contract. The E-mini futures contract has the point value of $50 which is much lower compared to that of normal S&P futures contract value of $250. With the E-mini, investors can trade a fraction of the overall index at a much lower price.

The E-mini offers great potential for traders. Greater liquidity and affordability for individual investors are the prime advantages of these futures. Since E-mini S&P 500 contracts are traded electronically, investors can trade round the clock. This is a great attraction and advantage for traders. They can trade all day long, 5 days of the week. You can even trade them from the comfort of your home.

Since the margin required is smaller in the E-mini futures, it is affordable for a lot of new investors. Margin requirements are lower than those of the full size contract. The attraction to E-mini is that you can begin trading with as little as $2000 (depending on the margin requirements of your broker).

High liquidity is another attractive feature; there are always buyers and sellers. Slippage and tight bid or offer spreads have been minimized owing to its high liquidity. Another great feature of the E-mini futures is that you can buy long and sell short and there is no uptick regulation in these trades

E-mini futures carry very low brokerage commissions. Brokerage commission is one of the main problems for new traders with little amount of capital. Because of the low transaction costs in the E-mini futures, one can trade more often.

US traders can benefit from lower tax rates on gains and income as the e-mini qualifies as "1256 contracts". This could be advantageous for many investors. This minimum tax reporting requirements helps to trade more private with reduced government interference. This will also encourage a lot of traders and investors to trade in the E-mini futures.

The E-mini offers a smaller contract that suits well for a broad range of traders. Since, these futures are traded electronically; it offers speed, reliability and flexibility. You can almost trade from anywhere at any time. It offers open, fair and transparent markets. E-mini markets have high volume and leverage. Thus, it is an ideal trading environment for day trading and short-term trading. It provides ability to have control over purchases and sales, giving reassurance in the money invested.

Because of the above said benefits, the E-mini gains a lot of success and popularity not only with amateur traders but also with the professional traders.

Lama Forecasting uses unconventional technical analysis techniques to offer unique stock market analysis services with accurate results. We forecast daily and intraday turns in advance for the S&P 500 and AEX stock market index. With our services we want to give investors and day traders the 'edge' they want over other traders.