Benefits of Online Brokers for Futures Trading

by Emily on February 10, 2019

in Articles

Futures trading is a simple and complex concept, the one that comes to life when a buyer and a seller make an agreement to exchange an asset at a specified date and price. The reason why this is so important is due to the fact that it gives both the seller and the buyer a chance to avoid a potential unfavourable change in price, which might come at a future date. As you can see, these contracts often serve as a form of insulation against a certain risk, which gives various interested parties a chance to profit by speculating the future course of the price. Needless to say, this concept was made so much simpler with the existence of online brokers.

1. Means of acquiring information

The first thing you need to understand is the fact that commodity trading tends to be more complex than ever before. The very existence of the global market means that there are suddenly too many factors for you to monitor. Fortunately, with the help of the right broker, you get more reliable information, access to real-time data and useful quotes that you can act upon. This can be provided to you verbally or as data in a form of charting software, screening tools and technical indicators. All of this gives you more leverage and increases your chances of making a suitable, profitable deal.

2. Lower margin

One more reason why trading in futures, more precisely trading in futures via a broker, is a great opportunity is due to the fact that it provides you with a chance to get a considerably lower margin. What we mean by this is that the margin tends to be between 5 and 10 percent of the total value of the contract. As for the benefits for you, i.e. the investor, you get to take larger portions with less capital. Needless to say, this only increases the potential that you’ll earn more.

3. Specialized seller

Another thing you need to understand is the fact that by looking for an online broker, you can always search for a platform that specializes in your commodity of choice. For instance, those interested in agricultural products can look for websites that specialize in grain trading and price monitoring. More commonly, however, people diversify their portfolio by investing in precious metals. This is why they need to find a broker that can keep them up to date with the fluctuation of gold prices. Sure, the gold market is not nearly as volatile as some other fields, yet, having a 24/7 support is always a smart choice.

4. Machine learning and algorithmic trading

Most important of all is the fact that these platforms are becoming more and more reliable with each passing day. This is due to the tech trend known as machine learning, which allows the platform to upgrade its own algorithm by processing its previous data. This concept is a fast-growing trend in the world of futures trading as well, which is why it might be worth some future research.

5. Downsides of the electronic marketplace

In the end, it’s important that we mention a couple of downsides of the electronic marketplace. First of all, the very possibility of a hacking attack or a glitch could potentially have disastrous consequences. Other than this, there’s a partial lack of transparency, which comes from physical separation with the person you’re trading with. Nonetheless, this can be made up for by finding a reliable broker. For this to work, you need to do your fair share of work and background checking. These downsides, are, however, made up for by advantages such as low fees and more democratic markets.

The most important thing you need to understand is the fact that you can’t look at online brokers and online trading in isolation, due to the fact that these trends are affected by all sorts of trends and development. Through concepts like the internet of things and the blockchain technology, this, already impressive, list of advantages could drastically expand in the nearest future.

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