Having works in the different sectors of the financial industry, I think this will qualify me to give a few comments on the broker industry.

Price spreads
Ten years ago working as a broker in the forex market was easy money, because you can quote spreads as wide as 10 points to institutional clients and clients are still coming back to you. This is comparable to arbitrage profit of 8 points as you can close off your trade in the inter-bank market at much lower spreads. Say your customer place a USD 10 million order, that is a risk free return of 0.0008 x 10 million = US$8000. That is because forex quotes are not widely available then, so customers just take whatever rate that their broker is quoting to them.

With the invention of internet, all customers, including the retails customers are able to see the forex spreads on the internet. As a forex broker, if you quote them a price spread that is wider than the average, they will ask you "Do I look like an idiot to you"?

10 years ago I would not be able to imagine that I can trade forex myself at home using only US$1000 as my capital, but that’s what a lot of retail traders are doing that now.

Customised products
Currently if you want to trade crude oil in the futures market, most likely you will be calling your broker to buy oil futures from Nymex exchange. Crude oil futures is a very huge contract, value of 1 point is US$1000, a lot of retail customers are not able to stomach this kind of risk. Say you buy 1 lot of oil futures at $135 and if the market goes against you by $5, your unrealised loss is US$5000. US$5000 is a few months’ salary to a normal employee.

Since most online platform looks identical and serves the same function, one of the ways that they differentiate themselves is product innovation. Since Nymex crude oil futures contract is too huge, they have customised normal oil contract into supermini oil contract, whereby value of 1 point is only US$100, which is very affordable to most people. This has thus attract small investors to trade futures as well.

From placing orders via phones to placing orders via online
10 years ago floor trading is common in a lot of exchanges. Customers have to pay high commission rate to brokers in order to get their order filled on the trading floor, and at that time many floor traders were receiving more than $10,000 a month salary while they were still in their 20s. Today a lot of trading floors all over the world had closed down and turns electronics. At that time customers placed their order via the phone.

With the use of internet many trading platforms are created. If you insist on doing your broker business using phone, then you face the risk of going obsolete in future. This is because by having an online platform, customers can view live prices, use the charting function, read news update and tracks the next big news using the events calendar provided.

As for voice broker what service does they get? Did I hear you say advisory services? If brokers are good at giving advisory services, wouldn’t they be trading on their own, why would they want to become a broker in the first place? If you are a customer which one would you prefer, an online broker or a voice broker? I certainly prefer an online broker.

Commission rate
To become a broker is one of the most high-paying job 10 years ago, at that time many brokers are driving luxury cars and living in expensive property. But with fierce competition, identical products and services offered, one of the ways to attract more customers is by lowering their commission rate.

We are in the commodity boom era now, many have perceived that being a commodity broker is a great job to be in. This may not be true, commodity boom actually attracts more supply of commodity brokers into the market and pushes commission rate down.

When I was a commodity broker, the big customers (mostly are listed companies) are always being poached by many brokers offering lower commission rate. Then the customers will reflect that to us and ask if we can match the same commission rate offered. If you want the customer you have to lower down your commission rate to satisfy the customer, or else you will not likely to hear from them again.

Many online platforms had already waived off commission for their products, earning revenue from either the spreads or taking opposite sides of customers’ position.
Would you rather pay low commission or no commission?

No expiration date
Commodities have backwardation and contango built-in due to their nature. Click <here if you do not know what backwardation and contango is. Since commodities futures contracts have expiration date, traders need to know in the event that the contract expires and a rollover is required, do the traders earn or lose contango spread as a result.

For a contango product, say gold, near term price is lower than far month price; so if the trader has a long position in gold that is expiring, he will lose contango spread when he rollover his current contract to the next month.

On the other hand, if the trader has a short position on gold that is expiring, he will gain contango spread when he rollover his current current to the next month.

However the concepts of backwardation and contango are not easily understood by retail customers. To solve this problem some online platforms have provided contracts that do not have expiration date, so this will mitigate the problem of rollovers.

Trust in online platforms offered by foreign companies
Currently one of the issues that most retails is concerned is the trust worthiness of the platform providers, as they need to deposit huge sum of money into the platform company before they can start to trade. These companies usually come from US and Europe.

With the use of internet, these platform providers do not have to register with the countries’ authorities in order to sell their products to the customers in these countries, because anyone who has internet connection from any parts of the world can have access to those platforms and will be able to open accounts with them.

I believe as time goes by, the trust by retail customers will grow as online trading becomes more common, and platform companies will try to gain recognition by register themselves with some reputable government authorities in order to gain confidence from the investment community.

Trading platforms that are leading the trend
If you want to look at two trading platforms that are leading the financial broker business, take a look at FXYard and Mansion. 

About Author

Currently I’m working as a trader in a hedge fund. Previously I was working as a commodity specialist in a bank, advising high net worth individuals and institutions.

Aspires to be a fund manager. In 2007, I had participated in a 1 year stock-pick competition organized by Zacks.com in America. At the end of the competition, I was ranked 407th out of 27,700 participants, hence this makes me top 1.47% of the competition. I had achieved 32.67% return on the competition portfolio, for the same period S&P was only up 6.99%, and Dow Jones was only up 4.16%, hence I had outperformed the broad market by a wide margin.

I can be contractable at metal.commodity@gmail.com.

A lot of people these days will tell you that futures is one of the most profitable financial investment instruments. The attraction of futures trading is the fact that it isn’t too complicated. The problem with typical stock markets is that there are thousands and thousands of stocks available, and to some that might seem like too daunting a figure to deal with. With futures markets, a speculator has only a handful of markets – about forty – to choose from. Just as it is easy to choose from that handful of markets, it is also easy to speculate commodities futures because the markets are affected by extreme weather conditions like storms or droughts. A decision to buy or sell can be made within moments of a weather report broadcast, and there is always a chance for profit whether prices go up or down.

There are in fact many advantages of futures trading. For this article, we will look into 3 of the best reasons why you should consider futures trading.

Small Commission Charges

Compared to other investments, the commission charges for futures trading are relatively small, and paid only after a trader’s position has ended. The commission charges may vary, depending on the service level of the broker. Commissions involving online brokers may be as low as $5, while brokers who provide full service in terms of advice on the trades made can charge up to $50 per trade. For a broker in a managed trading commission controlling all trading decisions at his discretion however, the charges can go as high as $200 on each trade.

Paper Investment

When you purchase stocks or bonds, you actually own that particular investment, but with futures it’s a little bit different. Trading futures does not require the trader to have or own actual physical goods on hand in order to trade them, because all the trader is really doing is speculating with futures contracts. It really is just a paper investment, like an insurance policy or a monetary bet. There are no physical goods involved in the exchange, and the actual commodity in the contract that is being traded is only exchanged on rare instances when the delivery of the contract takes place. For most futures traders (who are usually speculators themselves), the trade is a paper transaction, pure and simple.

High Leverage

The fact that futures contracts are highly leveraged financial instruments means that an investor can go into the market with a relatively small investment – called margin – and potentially come out reaping large profits. The concept of investors having to pay the ‘margin’ is comparable to a security bond, whereby should the trader make a loss on his trade, he may lose some, all, or even more than what he put up. However if his market predictions turn out to be correct, he gets back his margin and whatever profit he might have made, the profit usually being ten-fold on a 10% margin. In comparison to other investments, futures trading offers an excellent return, and this is why it is one of the best advantages of futures trading.

About Author

Click Here to gain access to your Online Trading Course today! Expert technical analysis, live trading videos and buy/sell signals all at http://www.trendlines.tv.

The ability to trade financial instruments like stocks, funds, futures and options have made trading much easier with high degree of automation and analysis. Traders can now trade options on different financial instruments over internet with discount commission schedules and on advanced trading systems. There are now a variety of online brokers offering options trading services including NobleTrading, OptionsXpress, Scottrade, and so on.
r />There are many things to be considered when choosing an online broker for options trading; most important ones are discussed here.

Stock brokers, because they are specialists, can provide you with peace of mind in your investments. That’s why it is so important to pick a good broker, especially when dealing with volatile investments like penny stocks—these tiny yet powerful money-movers are enough trouble without losing cash to a crooked stock broker. Yes, you will have to pay commission, but it might pay off in the long run. No, not all penny stock brokers are criminals. Research carefully before committing yourself to one of them.

If you are already immersed in stock investing, you probably have a broker who handles your affairs. Do they also deal in penny stocks? If so, and if you have had a positive experience with them, it might be worthwhile to simply extend their services to the realm of penny stocks. If you are a newcomer or feel that your particular broker would take advantage of the less-regulated penny stock market, you’ll need to start somewhere.

You can put the term penny stock brokers in any search engine and you will find a list that shows a list of online broker’s penny stock. Much research and thought is required to invest in penny stocks, and find a good reliable broker penny stock. Weigh each option thoroughly and well. The choice may be good or bad on their individual merits. Ask questions such as how long have they been in business, what are their qualifications, and can you get a list of their clients, or referrals. All these questions seem legitimate to ask, yes, you can try.

Penny stocks are not all brokers are seen as men, they are not all reliable, it suffices to find a good company, and a good broker in May need to go around. A good place to start is to ask some members of your family, especially if you know they have investments, with whom to trade with. You can get your foot in the door with a good company.

Go to reputable firms with track records that you can research beforehand. Ask if they extend their services to include penny stock speculations, and make sure you read all the fine print so that you don’t get stuck paying extra fees for venturing into this shaky type of stock market. Because with penny stocks as cheap as they are, you don’t want to be paying an extra cent on fees when you could be putting that same cent to work for you.

Penny stocks can be an excellent investment if you know what you have first, and with whom. Trading is risky for the most part, in some cases, but with research, some caution, and great courage, you can earn money if you make the right first. You all look very well, and see how you feel about the companies themselves is very great. If they seem at risk, or slow down or even put them aside for later.

About Author

Pankaj Gupta Author of whisperfromwallstreet.com consultant of Penny Stocks, Buy Penny Stock, Buy Penny Stock Online, Penny Stock Pick, Penny Stock Broker and Penny Stock Market.

Choosing the best online broker isn’t as easy it you will want it to be. You can’t just look at a single review chart of the best online brokers and pick the one that easily stands out as the best. The various brokers have different prices for different areas and each online brokerage firm features a unique set of strengths and weaknesses.

Towards the end of my article here I shall provide a link to my thorough guide to who I feel are the best online brokers. Yet before you reach that point, you must understand that the most vital part of picking an online broker is picking one that best matches your needs.  In order to pick one that best matches your needs, you first need to sit down and clarify exactly what you require as an investor and why.

For example, are you just looking for an online channel to manage your existing investments? Or do you hope to aggressively invest in penny stocks with day trading? You’ll find different pricing for these different area at almost all brokerages, so you need to understand which fees will apply to your particular needs and interests.

And don’t just be smitten by the first low fee you see. Most brokers offer some remarkable deals in one particular area… but that doesn’t necessarily mean they are the cheapest overall.  And sometimes expense isn’t the most important issue.  Rather, what sort of services does that broker provide for the price?

If you’re a wet-behind-the-ears novice looking to build a solid foundation of understanding, I urge you to consider spending a little more for a full-service brokerage. I know the cheaper trades at a discount broker can be awfully alluring, but when you’re starting out it is vital that you have experienced professionals helping you understand the market and helping you establish good research habits.

Later when you have developed your skills and knowledge, you can take advantage of those cheap trades through discount brokers.  But don’t be cheap when you first start.  I assure you it will cost you more over the long haul.

Most important, treat this like a real professional business. Be organized and thorough when you start and in how you select and work with the best online brokers. I know some of you may have reached articles like mine because you’ve read some ridiculous hype about making money online with online trading of some kind (usually penny stocks).  Try to put that dreamy hype aside and treat this with a serious professionalism.

About Author

Learn everything you must know about the top brokerages by reading my comprehensive online broker review: Best Online Brokers