Senthil - New kid on the bloc, but with a very wise set of questons to ask to your possible broker:
refcopro.com
How much does it cost to trade?
Are 24-Hour trading and support available?
Which exchanges are accessible?
Are offshore exchanges accessible?
How are the exchanges accessed?
How flexible and easy is it to trade?
Is there telephone support backup?
How fast are orders filled and reported?
Reliability?how often does the system go down?
Is alternative trade routing immediately available?
Are market quotes real-time or delayed?
Is depth of market data available?
Is real-time position and account equity data displayed?
Are trades screened for adequate margin?
Is the configuration of the user interface customizable?
What analytical tools are included?
How are various types of orders handled?
How are pending orders handled?
Can I trade spreads and option markets?
How secure is it to place trades over the Internet?
Now, about your risk capital:
IMHO, you would need to start with 3 times the margin needed for your usual orders: 1 time to cover the margin, 1 time for the losses you will incur trading (you will not win every trade, some will cost you: this is part of the game), 1 time for "other" purposes as to be able to close out a non-reported (or late reported) position.
Starting a trading account for one spoo translates in 3*margin (real name is "performance bond") $3938 (as per Nov 01, 2001) or roughly $12k minimum needed to fund your account.
Don't forget: even for day-trading accounts, the initial margin requirement must be funded, marked to market at every time of the day.
This means that, whichever the position you have open, your account must show:
initial position price less losses (marked to market) => initial margin requirement (one spoo = $3938)
Should your marked to market position be lower then the initial margin requirement, your account could be frozen (mostly so although most fine prints would assert that your position would be closed, but aint't necessarely so in the real life) pending a "margin call" to be funded with real money. Needless to say that your frozen position could turn out into a desaster. Hence, my advice to keep 1/3rd of that margin in reserve.
Further about account sizes:
at most brokerages, you will get extra service (first-served, access to RT quotes, research, lower RT costs,...) when first funded with $20K or $25K (phone the broker to know).
This can be siubstantial, example: below $25k account, RT fee=$10, above $25k in account, RT fee $6.
Further, need to know:
the day trading accounts.
Margin requirement usually sytarts at 50% discount.
With a new broker, you could negociate a margin requirement at half the exchange minimum, this is $2k for a spoo (but your position HAS to be closed BEFORE 03:45 CT. If not, exchange minimum initial margin applies = $3938).
After a few weeks with your new broker, you can negociate that margin lower, usually $1k per spoo for daytradin. (Initial exchange requirement still apply if you fail to close your day position, with the risks of having your account frozen).
So, if you are lucky, a day trading account for usual 1 spoo trades should require after a few weeks:
$1k minimum margin, $3928 provision for eventual losses, $3928 (in case your position cannot be closed as you want to) = $9k
Other fine prints:
you will be asked for the amount of capital you can afford to lose in futures trading, and that capital must be less than 10% of your wealth.
In any case, check your broker's status regularly at : nfa.futures.org
Hope this helps. :-) |
