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What to Look for When Selecting a Futures Trading Platform

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Originally published at: https://optimusfutures.com/tradeblog/archives/what-to-look-for-when-selecting-a-futures-trading-platform/

This article on What to Look for When Selecting a Futures Trading Platform is the opinion of Optimus Futures.

Your choice of futures trading platform is a critical decision that can enhance or diminish your overall trading performance. After all, your platform is your main gateway to the markets at large. From the exchanges that offer various market products to the individual traders across the globe who facilitate the transactional flow of the markets, your platform is the interface that allows you to engage this world of activity with just a few clicks and keystrokes.

But contrary to what some traders might think, a trading platform may not necessarily make you a better or worse trader, though it can amplify the knowledge and skills that you already bring to the table. So, when selecting a futures trading platform, start with yourself first– your skills, your knowledge, and your needs.

In other words, don’t adapt your trading style to the functionalities of your platform, but choose your platform according to the necessities of your trading style .

Trading Style vs Trading Platform

Think about this for a moment, and let it give pause: what do you really need to enhance both your trading experience and your trading performance ?

Get to the essentials and cut out the fat. Think of where you are in your trading career and decide on the role that a trading platform or trading software in general may play with regards to your own level of market engagement.

  • Are you a new trader who is just getting started ? If so, you may need to cycle through many futures trading platforms as you discover, develop, and refine your trading approach.

  • Are you a seasoned trade r whose approach might be more or less set? If so, you may need a new platform to upgrade a specific aspect of your trading performance or to modify your approach or overall strategy by way of a new or different technology.

Again, selecting a platform begins with you as a trader–your experience, your needs, and your goals. Let’s go over several important platform functionalities and think through each one.

Futures Trading Software Functionalities to Consider

Charts: Many traders commonly use bar charts or candlestick charts to analyze and trade the markets. But there are plenty more charts to consider (e.g. point and figure, kagi, renko, line break, etc.), each approaching markets from a different angle and point of view. What matters most is the level of detail that you want to see or eliminate when it comes to market activity. It goes without saying, that a person who trades using a point and figure chart (to minimize market noise) may have a very different strategy from someone using a candlestick chart to a get more nuanced view of price dynamics.

Historical Chart Data: Are you a day trader using who needs only a few days of market data to contextualize your trading environment within a smaller time frame, or are you a position trader who needs to load months of data to view on a daily to monthly chart? Your time-frame of choice may dictate the kind of historical chart data you require for your trading. And historical data may vary from platform to platform.

Indicators: There are hundreds of technical indicators available, each with the capacity to alter or enhance your analytical market view.

  • Most futures trading platforms come with standard indicators pre-loaded;
  • Some platforms offer proprietary indicators that aren’t available in other platforms;
  • Some platform give you the capacity to load third-party custom indicators ; and
  • Some platforms allow you to code and construct your own indicators .

When it comes to technical indicators, selecting the right platform depends on what you are trying to accomplish. In this regard, not all trading platforms are the same.

Execution Functionalities: Most platforms offer common execution functionalities such as trailing stops and price alerts. But some may offer automatic positional risk assessment, trade entry/exit automation, and more. If you trade multiple markets or use a complex trading strategy, you may want to consider more advanced trade-assist functionalities that can help simplify your trading.

Order Entry: This piece is critical as it directly affects your market execution. Does your trading style require a depth of market (DOM) window to view order flow, and if so, how many levels of buy/sell orders do you need? Do you prefer to automate your order entries, or might you prefer entering them manually? Do you prefer placing bracket orders complete with stop-loss and take-profit orders? Might you need one-click trading to increase your trading speed? Order entry is a crucial part of your trading execution, so spend some time thinking about this.

Ease of Dashboard Interface: A platform should feel intuitive to the user, as if it were designed to be “cognitively ergonomic” to the way you think, see, feel, and operate. This, of course, is subjective. Some people prefer their box of quotes to be on the right side while others prefer it on the top left corner; some prefer their charts to display different color combinations, while others prefer simple black and white; some prefer a single fixed DOM, while others prefer detachable or multiple DOMs. Whatever your preferences may be, you want to select a dashboard interface that seems “natural” to the way you view and act on market data. If a dashboard setup is customizable, then perhaps that’s even better.

Data and Order Routing Speed: If you didn’t already know this, the speed of data flowing into your charts is not necessarily the same low-latency data transporting the trading orders from your keyboard to the exchanges (or to the FCM routers which get transported to the exchanges). Chart data and order routing are two separate operations, and one can be faster than the other.

But let’s talk about order routing speed. Some traders will pay more for a “faster” trading platform. What many traders don’t realize is that sometimes the difference in speed can only be noticed when placing high-volume orders. This means that beyond a certain volume threshold, say (hypothetically) 100 futures contracts in one trade, you may notice less slippage with a “faster” platform. But below this threshold–and many day traders typically don’t trade anywhere near even 20 contracts per trade–the difference in speed may be negligible. Instead, traders may end up paying more in costs for low-latency functionalities that they never get to experience. Think twice about your platform if speedy order routing is one of your main criteria for platform selection.

Access to Markets and Asset Classes: This is a no-brainer. You need access to the exchanges that offer the markets and asset classes you trade. In the U.S., it isn’t common for a single FCM to offer access to multiple international products or exchanges. Not all FCMs even offer access to options on futures. Let’s suppose that you trade products on the CME, SGX, and Eurex. If you can find a single platform that can offer access to multiple products, exchanges, and (if you’re lucky) multiple FCMs, then you may have a winner. Finding a single platform that provides access to every product you trade may be a lot more efficient than using two or more different platforms.

Backtesting and Forward Testing Simulations: If you are the type of trader who actively develops and tests different trading strategies, then it would help to have both backtesting and forward testing capabilities to test your trade theories in a simulated market environment before going live. What’s critical here is having enough historical data to have a large enough sample size to make your simulated runs more representative of real-world trading. Bear in mind that results from a one-year simulation may not match the results of a simulation run for a period of a decade or more. Sample size is everything when it comes to simulated testing, The larger, the better.

Where Are Your Orders Being Held? When it comes to basic stop, limit, and market orders, where are you orders actually being held–on your computer, your FCM’s servers, or on the exchange? This is an important consideration because, eventually, all electronic systems will experience some degree of failure. So if your computer crashes, your internet connection fails, or your FCM’s server goes down, knowing exactly where your open orders are being held can help you decide who to call to either monitor your positions or manage your open orders.

Desktop VS Mobile/Web-based Access: If you are often on the road, then trading strictly via desktop computer may not be the best solution for you. You may require access to trading via mobile phone or tablet. If your futures trading platform doesn’t have a mobile app version, consider platforms that have a “web-based” version that can be accessed using any device with an internet connection. Again, if you are constantly traveling, then you may need a trading solution that can follow you wherever you may go.

Specialized Trading Functions: There are only a handful of trading platforms designed specifically for niche functions. Some of these tend to be more expensive due to a lack of market competition and relatively higher demand. One such specialization that comes to mind is spread trading, which may require spread charts, spread order entry, and spread margins. Another specialized type of platform that comes to mind is one designed for exotic options strategies requiring special order entry, Greeks, and risk metrics. If your trading strategy requires a specialized platform, then do your best to find the most reasonable price for the most comprehensive suite of functionalities.

News Feed: For some reason, news feeds on trading platforms are more common among stock trading platforms than futures trading platforms. But if you trade the news, then access to a news feed may be a mandatory item. It might be even better if your platform can alert you to scheduled events and economic reports. There are a few around, and Optimus Futures offers a futures trading platform designed specially for the news-based trader.

Selecting a Futures Trading Platform is No Easy Task

But what makes it challenging typically goes over most traders’ heads. Too often, traders are caught up comparing platform features and functionalities–which platform has more, which platform might be faster, which platform might be more popular (as if “following the herd” might indicate the right direction).

But platform bells and whistles don’t make the trader, as clothes don’t always make the man or woman. What makes selecting a futures trading platform difficult is that you have to think about how each functionality may help or hinder your own trading characteristics.

As with all things, knowing what you don’t need is just as important as know what you do need.

And getting to know what you really need when it comes to trading requires patience, experience, and reflection. It requires time. So take it slowly, and ask your broker to walk you through the different platform features to help determine whether a given futures trading platform might be a good match for your own trading goals and aspirations.

Do you need help choosing a Futures Trading Platform?

Optimus Futures can help you figure out the ideal combination of technology and features at the lowest possible price. Get our expert opinion on a good solution without compromising on cost, execution or performance.

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results. The placement of contingent orders by you or broker, or trading advisor, such as a “stop-loss” or “stop-limit” order, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders