Benefits of Trading Futures Online

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The old days of calling your commodity broker to place a futures trades are fading. However, I believe there will always be a need for a full service commodity broker, but there are many advantages to using and online futures broker.
Reduced Commissions
The most obvious benefit to trading online has to be reduced commissions. This is especially true for large traders and those who trade frequently. Commission rates can sometimes be the difference between a profitable year or a losing year. Commission add up quickly and by trading online you can often slash your trading costs by 50 - 75 percent.
The typical online commission for trading futures is about $5 to $10. The electronic markets are cheaper than the pit-traded markets, but the savings are substantial. The full service broker charges about $40 to $70 per round turn trade. Of course, you have to factor in that the broker is making trading recommendations and a lot of work typically goes into that. There are also broker-assisted accounts where you essentially make the trading decisions but you can bounce ideas off a broker and receive help. The rates for this type of account are typically $15 to $20 for a round turn trade.
Online Futures Learning Curve
A good argument can be made that you will learn more about trading commodities online in the long run than you would under the guidance of a broker. The only reason I bring this up is that many commodity brokers are not good traders. All brokers can certainly help you with the basics, but you can easily learn those on your own. If you are fortunate enough to find an excellent broker who is a good trader, then it is a different story. The problem is that most commodity brokers don’t fall into that category.
One thing I like about trading online is that you take ownership of your own trading decisions. It is 100 percent your call on each trade. You cannot blame the broker for bad trade recommendations or timing. Believe it or not, this will benefit you as a trader in the long run. You will know exactly how well or poorly you are doing based 100 percent on your decisions. This is also a great motivator. Effort will be channeled into fixing your own problems instead of blaming someone else or being led astray by a broker.
There are many practice platforms for trading the futures markets online. Trade-station, for example, allows their clients to trade real time on their online platform or they can trade on the same platform in simulated mode. This allows traders to practice their trading strategies in a very real environment. Essentially, you can switch back and forth from real time mode to simulated mode.
Online Trade Execution
Speed is another factor that clearly benefits trading futures online. There is no questions that it is far quicker to click one button on your computer to place a trade that it is to pick up the phone and call your broker with a futures order. It might not be critical for those who trade with a long term time-frame, but it is for those trading for the quick move. Online trading also makes it much more easy to place and track a variety of resting order in the market such as one- cancel-other (OCO).
Online Broker and You
In reality, arguments can be made by those who support online trading and those who are against it. There are many obvious arguments for online futures trading, but it is all a matter of personal preference. If you are day trading futures, you almost have to trade online. If you are a long term trader, you might see the added benefits of using a full service broker.
My biggest problem, especially for new traders, is that they know virtually nothing about the markets and almost every broker will appear to be an expert to them. You almost have to become a good trader before you can spot a good trader. Most commodity brokers have a difficult time making money for their clients over the long run, especially since they have to cover the added cost of full service commission rates. Some brokers are able to do this, but most of them only accept very large accounts or they are no longer accepting new accounts.
In the end, the odds favor using an online futures broker if you plan on putting in the time and effort to become a commodities trader. You will certainly have to do your homework each day if you trade on your own. Trading is not easy and those who work the hardest and smartest make the most money.


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