Commodity Futures Broker

With experience and savvy, a qualified commodity futures broker guides and assists individuals aiming for success buying and selling futures contracts. Although one may very well act for oneself, especially in the case of those with little or no experience in this field, experts recommend engaging a broker. Meant to be either bought or sold, a contract is traded on a futures exchange based upon a certain commodity at a determined price involving a specific future date. And this date of delivery is also known as the final settlement date. Utilizing a commodity futures broker's expertise and instinct for comprehending the economy's ever-shifting dynamics, an individual stands a much better chance of experiencing successful transactions. "Sheba, and Dedan, and the merchants of Tarshish, with all the young lions thereof, shall say unto thee, Art thou come to take a spoil? hast thou gathered thy company to take a prey? to carry away silver and gold, to take away cattle and goods, to take a great spoil?" (Ezekiel 38:13).

Indeed, there are several different ways to locate a commodity futures broker who inspires confidence. Although good instincts are invaluable to these financial professionals, enjoying a track record of successful trading experiences is the most telling harbinger of dependability. Also, a person should remember to note the length of time the company has been in business. Because it seems that 3-5 years is the usual maximum life span of most brokerage firms. Therefore, firms having remained in business for at least five years are safest to consider. To begin with, a person could search their local telephone directory. And of course there are the online phone directories to choose from. But the most effective method of locating these professionals is by conducting an Internet search. And this is simply because an online search yields far better results. Of course a person also must decide whether to engage a firm or an individual. Next, the client must determine which type of service is required. Lastly, remember it is also important to engage an ethical commodity futures broker with whom one feels at ease.

A person may consider the 2 primary types of firms: either Futures Commission Merchants, Clearing and Non-Clearing, or Introducing Brokers, Guaranteed and Independent. For example, Futures Commission Merchants, also known as FCM, solicit or accept orders, as well as assets including money. Furthermore, a clearing FCM indicates very large deposits of capital that guarantee transactions. Non-clearing exchange members are considered to be customers of a clearing FCM. This is because the non-clearing carries out trading through a brokerage company that is clearing. This guarantee is necessary in case both the firm and the trader default. On the other hand, there is the Introducing Broker. This commodity futures broker assigns the tasks to an FCM. And the Introducing Broker, also known as IB, is the one who interacts with the client. Meanwhile, activities on the floor are handled by the Futures Commission Merchant. In addition, the FCM is responsible for what takes place in the back office. It seems that some people perceive the Introducing Broker to be running a branch office. And others may think that the IB is acting as a middleman for the Futures Commission Merchant. But in actual fact, the Commission Merchants and Introducing Brokers are business partners. If Guaranteed, the IB is sure of its partnership with the Futures Commission Merchant. This means that all of the Introducing Broker's accounts are guaranteed coverage. Otherwise, the IB is actually an IIB, or Independent Introducing Broker. This kind of commodity futures broker is what is called 'self-guaranteed', which means that they hold their own minimum capital. As a rule, a client can depend upon the stability of a qualified Independent Introducing Broker.

Next, the decision is usually made between a full service or a discount commodity futures broker. In either case, an individual must keep in mind the need for a proven track record of positive results. In the first place, one can consider the services of a discount professional. This professional almost exclusively executes orders taken directly from the client. Naturally, this would most likely be a disastrous approach for those with little or no experience with trading. Or secondly, there is the assistance of the full service broker, in particular for those who desire a shared effort with the professional. In addition to investment counseling and supplying pertinent information, as well as trading advice, with professional help one is better able to compete in multiple markets. Of course, this assistance means that engaging a full service commodity futures professional affects the fee. And as a result, the fees for transactions under such circumstances are larger. Then there is the matter of commissions, which can be very different from one company to another. This is because a commission is usually negotiated. Moreover, a number of factors affect this negotiation, such as how often a client trades or the balance in the account. For example, the rate for some discount professionals can be markedly low for a frequent trader. And likewise in the case of a client who has a sizeable balance.

In the final analysis, the assistance of a commodity futures broker is essential for a serious attempt to succeed with this aspect of the trading market. A qualified, experienced broker is equipped to help a person negotiate the often perilous waters of the financial investment world. Of course this last doubles in importance during times of extraordinary economic turmoil. Added to this, is the extra service provided by keeping the client up to date on related developments, and so forth. A competent broker knows when the price offered is a fair one. In particular, the qualified broker is able to monitor the market in such a way that an individual's purchase and sales transactions will have a high probability of success.

Commodity Paper Trading

An investment in commodity paper trading is just the ticket for a person wishing to invest their money in something more tangible that is based upon supply and demand. "And it came to pass, that when he was returned, having received the kingdom, then he commanded these servants to be called unto him, to whom he had given the money, that he might know how much every man had gained by trading." (Luke 19:15). The fact is, when a person deals with stocks their investment is in something intangible. Because dealing with stock indexes and stocks involves investing in representative pieces of paper or in something that has so little substance that it lasts only for a very short time. In short, stock investments do not deal with things we can get an actual grip on. Instead, these investment opportunities exist in mental pictures and/or graphic depictions. Moreover, unlike commodities, stocks are very much influenced by emotions.

Indeed, it is a well-known fact that people's emotions fluctuate for any number of reasons that can often be difficult, if not impossible, to foresee or even understand. So generally speaking, this kind of investment involves much more, and different kinds of, risk. But with the commodity paper trading system, on the other hand, not only is emotional influence at a minimum, but here it is possible to trade until a person is well-versed in the process without risking a single cent. And in this way, the risk of investment trading is greatly reduced. This is because having unlimited opportunities to explore and learn results in accumulating savvy before risking any actual money. And too, experts recommend avoiding contracts and dealing only with options during the learning process. Thus, people have the chance to arm themselves in advance with experienced shrewdness as well as tested strategies. Prospective traders get to hang onto their money instead of risking their wealth while they pay as they go, which is what happens when dealing with stocks and stock indexes. In short, commodity paper trading is a system that safely simulates true commodity investments.

Another advantage of dealing with commodities is that it is much easier to predict where the prices are headed. There is an actual language involving price waves and various indicators that, once learned, renders commodities very predictable when considered in conjunction with relevant price information. And since accurate predictions are the goal of investment trading, generally speaking, it seems that commodity paper trading is the wise first step to success in this area. Once the ups and downs of price waves have been detected and mastered, and armed with the aforementioned indicators and price information, a person will be able to closely forecast the next move. Even better, a person dealing with commodities is unaffected by price increases and price decreases. This is because it is the prediction's accuracy that counts, not the direction that the price takes. Also advantageous, an individual may confine their prediction to a future that is as close as the very next day. And the fact that an individual can predict using this degree of caution without ever having to worry about a price being too high or too low, the way they do when dealing with stocks, is also what makes commodity paper trading a wise choice for new beginners. As stated above, stock and stock indexes are heavily influenced by emotions. But in contrast, commodities are primarily ruled by the law of supply and demand. And also as stated above, the inexperienced person should stick to buying options. The reason this is recommended is that someone buying options has a safe advantage. Because in this case, one hundred percent of the risk is assumed by the option seller. Also appealing is the fact that, although entitled to act, with commodities one is never obligated to do anything at all.

The first step to entering the world of commodity paper trading is conducting a very thorough research into a particular product. The next step, when one has finally decided upon the purchase, is to make note of the current price. Because this price level is the one where trading activity would have taken place. After this, observation is an important key. Thus follows a period during which the prospective trader continues to write down prices and subsequently observe the price movement of the selected product. As time goes on, the beginner's knowledge and experience with this commodity grows. There are two kinds of commodity paper trading: broker assisted paper trading and self-guided paper training. With the former system, the prospective trader enlists the help of a licensed broker. This would seem to be not only a very efficient, but also a very quick way to gain the necessary knowledge and confidence. On the other hand, there is the latter system which is an older one. In this case, the individual has chosen to fly solo, so to speak. Such individuals learn by depending on their own accumulated research. They carry out the trading process gathering experience on their own until they feel ready to tackle commodity trading in the real world.

Granted, commodities may not be much influenced by emotions, but naturally they are subject to other factors. Because supply and demand is indeed influenced by, among others, weather patterns, the previous harvest, usage, and of course the labor market. In fact, economic conditions in general have an effect upon commodities. But as said before, unlike stock and stock index investments, with commodities one deals with items that are down to earth, not ephemeral. And because these are everyday items, such as cotton and coffee, there is a much more personal feel to the process. And too, one can take their time gathering all the information before making the decision to invest, instead of engaging in expensive guesswork. Best of all, people can avail themselves of the free simulated trading websites that abound on the Internet. These websites offer training and videos that demonstrate how to proceed. Also, most often the website will offer the individual access to the advice of an experienced, licensed broker. All in all, for inexperienced people wishing to learn how to trade successfully in commodities before risking any actual wealth, commodity paper trading is the wisest choice.

Copyright© 1996-2015 ChristiaNet®. All Rights Reserved.