* Testimonials are not a guarantee of future success. Trading financial instruments, including Stocks, Futures, Forex or Options on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in any of these financial instruments you should carefully consider your investment objectives, level of experience, and risk appetite. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. The possibility exists that you could sustain losses exceeding your initial investment. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts. Past performance, whether actual or hypothetical, is not necessarily indicative of future results. All depictions of trades whether by video or image are for illustrative purposes only and not a recommendation to buy or sell any particular financial instrument and do not factor in trading costs in trading examples due to varying commission and fees among traders. The impact on market prices due to seasonal, market cycles or news events may already be reflected in the price. See full risk disclosure. See full risk disclosure
An international training center specializing in Stocks, Futures, & Forex
What You Need To Know About Brokerage Firms and Brokerage Accounts.
What does it take to start trading the Futures & Foreign Currency Markets?You’ll Need The Right Software, as well as a Brokerage Account:What is a brokerage account?A brokerage account is an account, very similar to a bank savings account, opened up for the sole purpose of trading the financial markets.•Your money is never at risk of loss, (or profits) until you enter, or make a trade.•Retail trading account reserves do not incur interest.•Brokerage accounts are not protected or guaranteed by the FDIC banking insurance program.•Profits are taxed at a lower 15% - 28% capital gains rate.There are two primary types of brokerage accounts; leveraged, and non-leveraged.•Cash accounts: No leverage, $1.00 = $1.00•Margin accounts: Leverage from 2% up to 200% or more.oA leveraged account allows you to basically borrow money to trade.oA leveraged account is what allows you to make a large amount of profits/losses with a small investment.Personal Accounts vs. a professional account•A ‘personal’ account is considered a ‘non-professional,’ and will not incur the professorial trader exchange fee.•A ‘professional’ account is someone who has made trading their business.oPro traders incur an annual exchange fee.oExpenses are tax deductible. oUsually will receive a lower commission on trades.There are different types of tax advantages you can use when opening brokerage accounts.•Standard, for profit, accounts.oNo retirement tax advantages▪Pull profits out immediately, and buy shiny things.•Tax deferred accounts, such as a traditional IRA, or 401K.oPre-tax money is invested, and the taxes are paid when you withdraw the money during retirement.•Tax free accounts such as a Roth IRA.oTaxed money is invested, and there are no taxes paid when you withdraw the money during retirement.For our purposes here, there are basically three types of markets:•Stock market trading accounts•Futures & Commodities trading accounts•Forex or Foreign Currency trading accounts.Most retail traders try their hand at trading the stock market first.•Stock traders soon realize that it takes a large amount of capital to make a small profit.•Stock traders are penalized for going short, paying high fees, interest, and possibly even dividends.•They’re then introduced to what is called: Pattern Day Trading rules that highly restricts their venture.oPattern Day Trader’s are required to maintain a minimum of $25,000 in their account at all times▪You are considered a pattern day trader if you exceed four (4) day trades within a five day period.▪You are also considered a pattern day trader if you buy and sell the same security in the same day. •Small account traders get chewed up and spit out by commissions, which consume their entire profit potential.•Most small account stock traders give up hope and stop trading after three months.oToo many restrictions, too high of commissions, too small of profits.More adventurous traders will try their hand at Forex, or foreign currency trading.•Traders basically profit from the price movement of differences between two currencies exchange rates.•A big advantage to Forex trading, is that there are no Pattern Trading rules.oYou can buy and sell as often as you want, no restrictions to go long, or short.•These are highly leverage markets, with leverage from 100% to 400%oThis means you only need a small amount of money to experience large profits, or losses.•Forex traders soon realize these are unregulated markets, with no exchanges, low volume, low open interest, and high commission rates--along with a lot of shady practices like dealing desks.oMost Forex firms advertise zero commissions and fees, but the fees are actually built into the spread, which is triple wide.▪Nothing in this industry is free.oDealing desks are a way of life in the Forex market, meaning for every penny you lose, your broker dealer gets to keep your losses…this pits your broker dealer against you.oYour broker dealer actually profit when you lose, and not just from commission, they get to keep your losses.oMost Forex brokerage firms are overseas, having moved there in an attempt to avoid US regulatory scrutiny.The most sophisticated traders will enter the commodity or futures market.•This is the most satisfying market to trade of all.•There are no Pattern Day trading rules, no penalties for going long, or short, no interest paid, with very low commission rates.•Traders profit from the the actual increase or decrease in real goods, such as Gold, Crude Oil, Corn, Wheat, & Orange Juice.•These too are leveraged markets, to the tune of 60%, not the 100% to 400% of Forex, yet not the 0%-2% of the stock market.oThis still means you only need a small amount of money to experience large gains or losses.oThe futures market also provides ‘mini’ contracts, specifically designed for smaller investors & traders.•Unlike the Forex market, the futures market is regulated by US regulatory bodies, as well as self regulatory bodies like the NFA.oDealing desks, like you find in the Forex market, in the futures market are actually illegal.oAll trades are made through an exchange, not a dealer broker.▪This provides a safe and secure environment where nobody’s trades are favored one over another.oEach trade is offset by another trader. Nobody gets to keep your losses, other than the trader who took the other side of your trade; there’s one winner for every loser.▪Trading on exchanges provides a high number of participants, giving a large degree of volume and open interest.•The futures market is where all the professional traders trade, large or small, this is where you go when trading for a living.In the Futures market, you can trade all kinds of wonderful things.•It’s where you trade the stock indexes, such as:oS&P 500oDOWoRussell 2000oNikkieoNASDAQoMidcap 400•You can also trade the worlds foreign currencies.oEuroFXoCanadian DollaroJapanese YenoAustralian Dollar, oSwiss Franc,oNew Zealand DollaroAnd many, many more…• It’s also where we trade the worlds physical commodities, the energies, metals, and food supply.oGold, Silver, Copper, Platinum and PalladiumoCrude Oil, Unleaded Gasoline, Heating Oil, and Natural GasoOrange Juice, Cocoa, Coffee, Sugar, Cotton, and RiceoLive Cattle, Feeder Cattle, Live HogsoCorn, Wheat, and Soybeans▪Soybean Oil, and Soybean Meal•We also trade the bond and note markets through the futures exchanges.oUS 30 year T-BondoUS 10 year T-NoteoUS 5 Year T-NoteoUS 2 Year T-NoteThe futures market is the place to be if you are serious about trading for a living.•It’s the last bastion of true capitalism on earth today.•In my opinion, it’s the ‘safest’ place to invest from a trading stand point.•It’s really the only choice as far as we’re concerned.Many large Walmart style brokerage firms, such as TD Ameritrade, Scott Trade, Fidelity, and Charles Schwab will allow you to open your brokerage account, and trade all three markets, Stocks, Futures & Forex from one account.•In my opinion, this is akin to mixing Captain Crunch, Bacon and Eggs, and a slice of cheese cake into a single bowl, mixing them up, then pouring coffee, sugar and salt over the top and trying to eat it with a plastic spork from McDonalds. (Yuk!)Our recommendation is to stay away from such firms.There are small boutique trading firms, known as IB’s (Introducing brokers) that specialize in helping retail investors reach their goal as independent traders, it’s basically they’re mission. Whereas the large Walmart style brokerage firms are more interested in just getting your money ‘under management,’ where they can charge management fees and large commissions, which is where they make their profits.•Large firms generally offer free-cheap-crappy browser-based software in an attempt to bait you into opening an account with them. Remember, it’s worth exactly what you paid for it, and in the long-run ends up costing you a lot of money.oThe best, small boutique firms, will usually ask, or require you to buy professional grade trading software platforms.oThey may offer a free platform for placing orders, but if you’re serious about being a trader, we don’t recommend you use any free trading software.oUsually, free trading platforms do nothing but a disservice, and end up costing you more in the long-run.•Large firms hire college kids, who have never traded a day in their lives, to teach you to trade, and provide trading advice. oSmall boutique firms are usually run by passionate professionals, who actually trade their own money, and love to share their passion and knowledge with others, usually for a small fee. (Again, you get what you pay for.)•Large firms have big ad budgets, lots of free giveaways, and slick advertising to entice you to open your account with them.oSmall firms have small ad budgets, and usually rely mostly on word of mouth and reputation.•Large firms sometimes have a bit lower trading commissions.oSmall firms will sometimes charge smaller commissions in an attempt to compete with larger firms, but this requires them to charge for services you might otherwise get for “free” from larger firms, such as training, advice, research, and software.oSmall firms will often offer full service brokerage services; a dying service in the retail trading world.•Large firms usually have 24 hour help desks manned by foreign contractors to help you with questions.oSmall firms usually close their doors, and go home at night, and spend time with their families, like you should do.oSmall firms in the US, have actual humans, who generally answer the phone, and will usually provide a 24hr. trading desk.•Large firms usually have you open one account, and you will trade all markets, stocks, futures, Forex, and options from a single account, using the same crappy, usually Internet browser based software.oWhen you fail miserably, they will offer to ‘manage’ trade your money for you, in a fund with high fees, which has more likely than not, never even beat the S&P 500 index.oSmall firms will generally ask you to open one account for each type of market you want to trade.▪Dedicated stock market account, using dedicated professional grade PC based stock market trading software.▪Dedicated Futures & Commodities account, using professional PC based live trading platforms.▪Dedicated Forex account, using PC installed software designed just for trading foreign currency.If you open your account with a small boutique IB brokerage firm, you’ll usually open up one trading account for each different type of market. One account for stocks, one account for foreign currency, and, or one for futures. This is usually done because they specialize in a particular market and usually the software they use is designed with that single market in mind.•It is very common to see small boutique futures trading IB’s specialize just in Futures, and not even offer Stocks or Forex.•Most Forex only IB’s are not qualified to trade Futures & Stocks.•Most Stock’s only IB’s lay awake at night wondering what Futures, Forex, and Commodities even are…There are two different types of Futures IB’s.•Self Directed IB’soThese are larger, generally more stable IB firms, which have passed extra levels of compliance, and are also required to maintain a threshold of personal financial security in a private bank account to basically sure-up solvency.•Guaranteed IB’soGuaranteed IB’s are very small firms, usually a single individual, or very small number of highly skilled professionals, who specialize in a niche market, trading type, or style.▪Guaranteed IB’s are required to work under the license of a Self Directed IB, as it’s the self directed IB that is ‘guaranteeing’ compliance and solvency of the smaller firm, or individual.Keep in mind, IB’s never actually take possession of, or hold your money themselves at any point, they work strictly through exchange approved clearing firms, which are basically large banking style institutions, with names that you’ve probably never heard of, since retail traders are not usually allowed to open accounts with them directly; although there are some retail broker dealer clearing firms. It’s these exchange approved clearing firms who hold, account for, and mark-to-the-market each day’s profits and losses; they’re basically big accounting firms, and they’re who you’ll send your money to when you open an account with your chosen IB.We recommended the following Self Directed IB, and Live Trading Platforms:•Gecko Financial Services, Inc. (On the web at: www.GeckoFS.com )oGecko FS has been in business for over 10 yearsoThey are partners with Gecko Software, Inc. which has been in business for over 18 years.▪Gecko Software develops professional, PC based and installed, live trading platforms for Stocks, Futures & Forex•Track ‘n Trade is the professional live trading platform developed for Gecko Financial Services.•Track ‘n Trade has been recognized by Stocks & Commodities Annual Reader’s Choice Award seven times.•Find this award winning platform on the web at: www.TracknTrade.comoSimply install the two week trial of Track ‘n Trade, once the trial has concluded, click the box inviting you to open a live trading account with Gecko Financial Services, and follow the online instructions.▪Someone from Gecko Financial Services will contact you with details and assistance.▪Someone from Track ‘n Trade (Gecko Software) will contact you with details and assistance.▪It couldn’t be any simpler than that.•Continue working with www.TradeMentors.com for all your training and trading education.