Types of Futures Accounts

An individual that is interested in joining the futures market can select from a plethora of account options. It is important at the onset, for a new futures trader to decide which account is best for him and suits his style.

If you have some previous experience in the forex markets or well versed in making investments, then you will be most comfortable conducting trading sessions under your own terms. If you decide to open an individual trading account, all the buying, selling, Stop/Loss and any other aspect pertaining to forex trading will be entirely up to you.

In addition, the cash deposits, and the initial margins, as well as their proper maintenance, will be placed directly under your supervision. Of course, your forex brokerage firm will be there to provide you with all the tools necessary to conduct your research: news, analysis, reports and should you need it, broker advice.

As a forex trader, you should also know that the account is carried by the Futures Commission Merchant (FCM) and is separated from the institution's own finances.

If you are new to forex or futures trading, or would like to have an expert help you, then a managed account may be more to your liking. This entails getting an account manager to carry out your buy and sell orders. Of course, any implementation will first be subject to your approval, unless you give your manager the right to trade based on his own judgment.

It should be noted that having an account manager for your futures account requires a higher fee. In addition, account managers may be entitled to a percentage of each futures contract, or a fixed fee. Before you make any commitments, review all the necessary paperwork.

As the account manager will be your link to the futures market, make sure you establish a good working relationship with him/her. If you disapprove of his methods, then look for another one, or another type of futures contract.

An alternative way of joining in the futures market is by way of a commodity pool. This is unique among other futures accounts because your deposit will be merged with those of other clients. In other words, you will be able to share in the profits of the entire pool, and there is also no margin call.

However, there are some risks associated with a commodity pool. The biggest is that any loss will be carried by all members. In addition, there is no guarantee that the pool is connected with any futures institution.

Before participating in a commodity pool, be sure to read the Disclosure documents, and also inquire about the Pool Operator, the participants, the amount needed to be raised before trading can commence, leverage etc.

As you can see, there are all types of futures contracts to suit any and all kinds of futures traders. The important thing to remember is to select the one that bests fits your plans.