subject: Es Emini Day Trading: Full Service Broker Or Deep Discount Internet Broker [print this page] ES Emini Day Trading: Full Service Broker or Deep Discount Internet Broker
This is an interesting and complicated question to answer. To my way of thinking, there is no answer but to use a deep discount internet broker. I dont need advice and dont really want to talk with a broker on a regular basis. But then again, I have been doing this for a while.
Having worked the retail and institutional sides of trading, one thing you will find is that large deep discount brokers are not the chatty types. They will answer questions, but by and large, they are very busy and want you off the phone as soon as possible. And that is really just a matter of economics, a deep discount broker is going to spend the most time with his largest clients...the ones with which makes him the most money. If you are a novice broker with a $5,000 account, you can count on a minimal amount of support.
This lack of support becomes especially important if you enter a trade improperly, make some sort of mistake, or dont get a proper fill. Time and time again, I have watched new traders try and trade thin markets, with wide bid and ask prices, and have a nearly impossible task of exiting the trade at any price. A discount broker may give you some perfunctory advice on what contract to trade, but he is not there to teach you to trade, and he wont.
On the other side of the coin, a full service broker is going to have all the time in the world to speak with you. Of course, he is much going to charge a much higher commission than a deep discount broker. But sometimes, I suppose the advice might be worth the extra commission. A full service broker is more likely to point you to highly liquid markets where you will experience minimal slippage, and give you some inkling as to which way the market is headed. Of course, from my perspective, its important to trade just the chart, but I can envision any help for a novice trader being a good thing.
So it comes down to price and your trading needs. If you are new to trading, I dont know that a full service broker would be the worst decision in the world. You will get strong support and the best advice the broker can offer. But you will pay a price for this, and you will have to decide whether or not the price is worth the value a full service broker provides.
On the other hand, a deep discount broker will offer you a round trip at a price anywhere from $5-8. But you will basically get a trading platform, a DOM and a statement every night. I can also tell you some horror stories about trades gone wrong, or trades that did not get entered. In the case of problems like these, you might well have put your money into a black hole. It takes time and effort for the broker to decipher the computer machinations on a trade in question to get it straightened out. All the while, your money could be tied up and you are unable to trade. Of course, situations like this are rare, but I have experienced on two different instances and it can be infuriating. The truth is simple, a broker is going to do what makes him the most money and fixing a botched trade, even if it was a computer problem on the part of the brokerage, doesnt make the broker any money. It will be a low priority.
I use a deep discount broker, that does not mean that you need to do this, though. Give your trading situation some thought and decide if the extra money is worth the price.
by: David S Adams
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