Trading futures is not like waking up one day and deciding to strike while drinking coffee and watching a few YouTube tutorials. These are serious things and there is a lot that can go wrong. You can easily stumble across the first hurdle by choosing the wrong futures broker.
Luckily, help is always on hand – here’s a breakdown of our top futures brokers, along with some guidance on how to choose between them.
What distinguishes future brokers
As you probably already know, futures trading involves agreeing to a contract to buy or sell an asset at a fixed price in the future. In other words, they can be used in bull or bear markets. Futures offer a way to trade a strategy or your view of the future price of an asset. You can lock in (what you think) a reasonable price today and (if all goes well and the momentum is in your favor) sell or buy back to make a profit later. Of course, if you’re wrong, it can backfire, making it a risky business.
But this superficial difference between futures and other types of trading is not the only thing that makes future brokers slightly different.
One of the key differences is the fee structure. When you trade Forex or CFDs (Contracts for Difference), the commission involved is the spread between the selling and buying price of the asset. For futures, you will also pay a flat contract fee plus exchange fees.
Because futures trading is so advanced, brokers are subject to stricter regulation; in the United States, they must be regulated by the National Futures Association (NFA). In addition, futures brokers are targeting a more knowledgeable clientele than other financial products, which means they are less likely to have the resources or features that are good for newbies. However, most of them will offer charting packages that include the most common technical indicators.
Which futures broker is the best?
Now you know how futures brokers are different and you probably want to know which platform you can trade futures on. To assess which platform is right for you, carefully consider the following factors:
- Regulation
- Commissions and fees
- Account minimums
- Capabilities for charting and analysis
- Customer service (and dedicated futures broker support)
- Leverage offered
- Access to up-to-date reports and market research
- Variety of assets
With that said, let’s take a look at six of our favorite options.
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InteractiveBrokers
Suitable for: Traders from other countries.
Fee: $ 0.65
Account minimum: $ 0
Interactive Brokers focuses on providing a wide range of trading products at the lowest prices and has received awards from everyone from the Investopedia Online Brokers Awards to the NerdWallet Best of Awards.
Here you will find a wide range of assets (including thousands of mutual funds) and many unique features such as fully customizable columns and order types. One of the most significant advantages is access to international markets and traders from all countries can use the platform.
The platform offers two types of accounts, IBKR Lite (no commissions, no minimum accounts, and no inactivity fees) and IBKR Pro (offering a wider range of products for experienced traders). Both platforms charge $ 0.85 per contract when trading futures. Unfortunately, opening an account can be difficult for some people.
InteractiveBrokers is a registered seller with the Futures Commission, which is regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Pros:
- Low fees
- Suitable for people from all over the world
- Diverse range of assets
Minuses:
- Opening an account can be tricky
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TradeStation
Suitable for: no commission trading
Commission: $ 0.85
Account minimum: $ 0
TradeStation offers futures contracts for indices, currencies, bonds, commodities and more. You can access the market around the clock in both the US and Europe, and it also has a wealth of market data and customer support specialists to assist you further.
The platform does an excellent job of providing both advanced instruments and low-cost, no-commission trading options – futures contracts start at $ 0.85. But what makes it unique is the offering of e-mini futures (one tenth the size of a regular contract), which you can trade from $ 0.50 per contract.
Unfortunately, there is a $ 50 / year fee for inactivity.
The company has existed since 1982 and is regulated by the SEC, FINRA and as a futures commission trader (FCM). The international version is regulated, inter alia, by the Financial Conduct Authority (FCA).
Pros:
- Complex tools
- No commission
- Long history of the platform
- Can trade micro futures
Minuses:
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E * TRADE
Suitable for: mobile commerce
Fees: $ 1.50
Minimum deposit: $ 0
E * TRADE stands out for its product range; it offers over 200 futures contracts to choose from, including derivatives, currencies and metals.
You can also trade futures on the go with user-friendly mobile and desktop trading platforms. While some other brokers offer this, the E * TRADE app stands out for its easy-to-use interface and full functionality.
It charges at least $ 1.50 per futures contract; fairly average, but it ranks it higher than some of the other options on this list. On the other hand, there are no fees for inactivity, withdrawals, deposits, etc.
E * Trade is regulated by the SEC and FINRA. It offers futures products through E * TRADE Futures, which is a member of the NFA.
Pros:
- Excellent opportunities for mobile and desktop trading
- Trade various assets
- No hidden or additional fees
Minuses:
- Fees are higher than some others
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Charles Schwab
Suitable for: beginners
Fee: $ 2.25
Account minimum: $ 0
Charles Schwab is one of the more prominent futures brokers on this list (and one of the most prominent US stockbrokers), and he doesn’t disappoint with his diverse offering.
While we said that futures trading is generally not suitable for beginners, it is one of the best options due to the sheer amount of educational resources available, both in the Trading Statistics section of the website and in the customer support. Experienced traders will also not be disappointed with access to the latest market research and news.
However, futures are priced at $ 2.25 per contract, which is a higher price. But with a $ 0 minimum account, you can at least try it with small amounts and know that you are in good hands. As you would expect from such a well-known broker, Charles Schwab does whatever it takes to regulate.
Pros:
- Various assets for trading
- Lots of educational and marketing resources
- Installed broker
Minuses:
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TD Ameritrade
Suitable for: experienced traders
Fee: $ 2.25
Account Minimum: USD 1,500
Another well-known broker, TD Ameritrade, will give you access to over 70 futures markets where you can trade a variety of indices, assets and currencies.
The platform comes with some of the most sophisticated features you could wish for to satisfy even the most advanced traders. For example, its unique ThinkBack feature allows you to test your trading strategies against historical data to see if they are suitable for your goals.
Like Charles Schwab, TD Ameritrade charges $ 2.25 per futures contract. It also requires $ 1,500 in your account to start trading, making it more suitable for experienced traders than beginners.
The platform is regulated by the SEC, FINRA and CFTC.
Pros:
- Created platform
- Advanced tools
- Many types of assets
Minuses:
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Optimus futures
Suitable for: micro futures.
Commission: $ 0.10 to $ 0.50.
Minimum deposit: 500 $
Optimus Futures isn’t necessarily the right platform for everyone, but what it does does well – and that’s discounts and micro-futures. As you would expect from choosing a discounted futures, it also has low fees. Plus, you’ll get an extra discount on high volume, with some commissions as low as $ 0.1 per trade, although this can go up to $ 0.5 per contract.
There is no inactivity fee, but withdrawal fees can be quite high. Another drawback is the lack of a mobile platform that most other options offer.
The platform is regulated by the US Commodity Futures Trading Commission and the NFA.
Pros:
- Low prices
- Access to micro-futures
- Bulk Trade Discounts
Minuses:
- No mobile platform
- High withdrawal fees
FAQs
What is the best futures broker for scalping?
Various brokers allow you to scalp futures. However, TransAct Futures is a broker specially created for this purpose, so it is worth checking out.
What’s the best futures broker with API trading?
InteractiveBrokers allows you to trade futures using its web API, which is a great option as it is user-friendly and has all the features you need, including access to market data and the ability to view positions.
Which Futures Broker Is Best For Beginners?
We recommended Charles Schwab for beginners as it is regulated and has many educational resources.
What is a futures commission seller or broker?
The Futures Commission Trader (FCM) allows traders to buy or sell orders for futures contracts, which means they collect the margin and ensure the asset is delivered. They can be either clearing FCMs or non-clearing FCMs, but if they are not clearing they must use the clearing FCMs to complete trades. FCMs must be registered with the NFA, but any broker registered with the SEC restricts their activities to futures and related activities can be registered.
Happy trading
As you can see, there are some excellent futures brokers out there – while there are undoubtedly the wrong choices (for example, platforms without proper regulatory approval), there is no single right choice. The only thing I’m encouraging is to make sure that futures trading is right for you before you get stuck in it.
However, if you know what you are doing and have chosen the right broker, trading futures can certainly be a rewarding (and rewarding) experience. Just make sure you don’t miss out on those pesky commissions and exchange fees!
This post was originally published on Wealth of Geeks.