From the August 01, 2012 issue of Futures Magazine • Subscribe!

6 common new trader questions

4. “Why am I not getting the prices I want?”

For new traders, it can be bewildering when you don’t get the order price you asked for. Say “hello” to slippage. “When markets are declining quickly, there are a lot of people believe that if they put in stop orders, they have protected themselves,” Sanders says. “Unfortunately, the markets don’t work that way and everybody is exposed to slippage. There’s no getting away from it.”

Although order books typically are deep enough to ensure you get the price you ask for, if volatility is on the rise that liquidity can dry up. The result often is that you do not get the price you initially asked for, especially if price is moving quickly. While slippage can work in your favor, it’s really best to expect it to go the other way.

5. “How do you charge commissions?”

For the privilege of using brokers’ access to the market, they charge a commission on every trade that is placed through them. While every broker likely has a slightly different commission structure, there are some common things to watch for.

First, find out how often a broker charges commissions. Do they charge per side or round trade? If it is per side, that means they charge a portion of the commission on both the entry and exit orders.

In addition to the commissions a brokers charge, they also collect feels for the exchange and regulators, if applicable. Many brokers lump this all together in a “commission-plus” model where the fees are added to the broker’s commission.

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