The Complete Guide to Futures Trading: What You Need to Know about the Risks and Rewards

CHAPTER 3

Trading with a Broker as a Partner

Are you ready to jump in and start trading? Buy-and-hold, the foundation of stock trading for generations, may not work as well in today's marketplace. Stocks have proven to be vulnerable to tremendous price swings—both up and down. In this environment futures and options on futures can be attractive alternatives for those investors who are seeking speculative opportunities in both bullish and bearish market scenarios as well as for those who are simply trying to protect current exposure via a hedge.

However, you still have a few decisions to make, starting with an honest assessment of your ability and confidence to trade and the amount of help you need to pursue your trading program.

WHAT A BROKER CAN OFFER

Depending on your trading knowledge and experience, one of the most important decisions you might make is what type of brokerage relationship to have. Brokerage firms offer a variety of arrangements, from self-directed where traders make all the decisions independently to professionally managed accounts where traders have no involvement in the trading decision other than providing the money and selecting the money manager.

Many traders prefer a broker-assisted program, which is a hybrid of self-directed and managed accounts offering key aspects of both service levels. Broker-assisted programs can benefit a wide spectrum of traders, whether they are novices seeking guidance at almost every level or seasoned veterans looking for an ...