1. Beginner's Guide To E-Mini Futures Contracts: Introduction
  2. Beginner's Guide To E-Mini Futures Contracts: What Are The E-Minis?
  3. Beginner's Guide To E-Mini Futures Contracts: E-Mini Characteristics
  4. Beginner's Guide To E-Mini Futures Contracts: E-Mini Specifications
  5. Beginner's Guide to E-mini Futures Contracts: Popular E-mini Contracts
  6. Beginner's Guide To E-Mini Futures Contracts: Who Trades The E-Minis?
  7. Beginner's Guide To E-Mini Futures Contracts: Trading The E-Minis
  8. Beginner's Guide To E-Mini Futures Contracts: Other E-Mini Contracts
  9. Beginner's Guide To E-Mini Futures Contracts: Volume and Volatility
  10. Beginner's Guide To E-Mini Futures Contracts: Margins
  11. Beginner's Guide to E-Mini Futures Contracts: Rollover Dates and Expiration
  12. Beginner's Guide To E-Mini Futures Contracts: Brokers
  13. Beginner's Guide To E-Mini Futures Contracts: Tax Advantages

If you want to trade any of the e-mini contracts, you need to have an account with a brokerage firm that offers e-mini products. Since the e-mini stock index futures contracts discussed in this tutorial are, in fact, futures contracts, a futures account is necessary. In general, this account will be separate from other account types (such as accounts for trading stocks or Forex). Many traders have multiple accounts so they can trade in various markets. When researching and selecting from among the dozens of brokerage firms that offer e-mini trading, it’s important to take into consideration the following factors.

Regulation

The National Futures Association (NFA) is the self-regulatory organization for the U.S. futures industry that develops rules, programs and services to maintain market integrity, protect investors and help NFA members meet regulatory responsibilities. The NFA regulates every firm or individual who conducts futures trading business with public customers (like you).

You can check the registration status and disciplinary history of any futures firm or individual by searching on the NFA website. The Federal Reserve Board, FINRA and securities exchanges regulate margin trading.

Fees and Commissions

While fees and commissions do change from time to time, an up-to-date list can be found on any reputable broker's website (the sites will also list pertinent initial margin and maintenance margin rates). Futures commissions are charged on a per side, per contract basis. For example, if you enter a long ES position with five contracts, the commission will be based on the trade entry (one side) multiplied by the five contracts. An additional commission will be assessed when the trade is closed (the "other" side of the trade). Often, commissions are on a sliding scale depending on how many contracts you trade each month. In general, the more contracts you trade each month, the lower the commissions. 

In addition to commissions, you’ll also pay exchange execution and clearing fees. These vary by market and instrument, and by your exchange membership level. For most retail traders, exchange execution and clearing fees add another $1.18 per side, per contract. Non-exchange members pay an additional NFA Regulatory Fee of $0.01 per contract.

Margin Requirements

A brokerage firm's margin rates will also be listed on its website. As discussed in the "Margin" section of this tutorial, margin rates are set by the exchanges but can be tightened by individual brokerage firms. In other words, a firm can require more stringent margin rules, but can never allow more relaxed rates than those set by the exchanges. Like the exchange requirements, brokerage requirements can change from time to time and without notice. 

Trading Platform 

Brokerage firms that offer e-mini trading provide clients with access to at least one trading platform. The trading platform is your portal to the markets and typically provides real-time charting, technical and fundamental analysis tools, and an order-entry interface. A well-designed platform will be easy to use, visually pleasing, and will have the ability to be customized in terms of layout and colors. In addition, and of particular importance to active traders, a good trading platform must have clear 'buy' and 'sell' buttons that allow for easy order entry. This is vital to avoiding costly order-entry mistakes.

The following chart shows an example of a robust trading platform that provides technical analysis tools and a variety of easy-to-use order-entry interfaces. In this example, a Chart Trader order entry interface allows traders to place buy and sell orders directly from the chart. 

Many trading platforms allow you to trade directly from a chart. Image created with TradeStation.

Advanced features, such as the ability to backtest or create custom trading strategies that can be auto-traded, may also be important factors depending on your specific goals. Many brokers offer free demo accounts that allow you to experiment with the platform before opening and funding an account. In addition, many provide "simulated" accounts – hypothetical accounts that let you place paper trades without risking real money in a live market. (For related reading, see Pros and Cons of Paper Trading.)

Trade Execution Quality

Certain brokers list monthly statistics regarding trade execution quality and speed. Reliable and fast execution is paramount to achieving the best prices on trade entries and exits. Since some brokers boast fast execution speeds for institutional clients only, it’s important to determine the type of execution quality you can expect from a broker. When researching execution speeds, read the fine print: Statistics should be provided by independent, third-party vendors that are not affiliated with the brokerage firm in question. (For more, see Understanding Order Execution.)


Beginner's Guide To E-Mini Futures Contracts: Tax Advantages
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