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A commodity Broker or trader markets commodites to investors on specific futures and trading exchanges. Commodity futures trading offers an exciting market to invest in or work for as a broker.

Trader

A commodities trader works on the floor of a futures exchange. Traders normally trade for their own accounts. A commodity day trader will open and close positions daily.

Broker

A commodites floor broker works for a firm that trades on the exchange. Normally floor brokers are executing customer orders and not trading for their own account.

Futures and Commodity Exchange

Exchanges where commodities and futures trade include: Chicago Board of Trade, Chicago Mercantile Exchange and the New York Mercantile Exchange.

Commodity Futures Trading – Why It's Not For Average Investors

If you don't mind losing $5,000 in 10 minutes, you may enjoy trading commodity futures contracts. There's an old saying among commodity traders: "It's easy to make a small fortune in commodities. Just start with a large fortune!" This is not a business for people who are emotionally attached to their money, yet thousands of average "investors" get lured into the commodity markets year after year. Why? Because of the possibility of making high percentage gains using the built-in leverage that is available to commodity futures traders.

The commodity markets include wheat, corn, soybeans, pork-bellies, gold, silver, heating oil, lumber, and numerous other common trade items. The huge companies that operate in these markets use commodity "futures" contracts to lock in their selling prices for the product in advance of delivery. This practice is called "hedging." On the other side of that transaction is the trader, who speculates on whether the priced of the commodity will go up or down before the contract is due for delivery. Because futures contracts may be purchased using leverage, these financial instruments lend themselves to speculation.

For example, control of a corn contract worth $5,000 may only requrie $500 of actual cash, or 10% of the face value of the contract. If the corn goes up in value, and the contract becomes worth, say, $5,500, the speculator has made $500 on his or her original $500, for a 100% return. Compare this with the regular stock market, which limits leverage to 50%, so that $5,000 worth of stock requires a minimum of $2,500 of capital. If the stock goes up to $5,500 in value, the $500 gain is against $2,500 invested, for a return of "only" 20%. The 100% return sure looks a lot better, right?

You can easily see why investors in search of quick gains are hypnotized by the lure of big profits using maximum leverage in commodity futures trading. The real problem, however, is that the leverage works in BOTH DIRECTIONS. You can lose your entire investment in a matter of minutes due to the wild price gyrations that sometimes occur in these volatile markets. Let's say the $5,000 contract drops to $4,000 in value instead of increasing. You've not only lost the original $500 you put into the contract, but an additional $500. You can go broke quickly this way.

So why do people play this game? Average investors do not wake up in the morning and say to themselves, "Right, I think I'll start trading commodities." What happens is, they receive a sales pitch from a commodity trading "guru" claiming to have a "system" for generating sure-fire profits in these wild markets. These "systems" range in price from $25 all the way up to $5,000 or more, and are sold based on the promise of "huge profits" from a small starting investment.

Newsletter writers or commodity gurus regularly pitch the myth about turning $5,000 into a million bucks in less than a year. The typical commodity system pitch comes in a long sales letter or booklet that describes a method for winning on "9 out of 10" trades or similar inflated claims.

Of course, if it was possible to correctly trade 90% of the time, a person could easily amass millions of dollars in a very short period of time. So why are these guys so eager for you to spend $195 on their super-duper trading course? Because they probably aren't making any real money with their own trading program! There's much safer money to be made selling others on the idea of getting into commodity futures trading.

There is no sure-fire way to consistently make money in these markets, simply because the underlying commodity prices can swing wildly back and forth depending on a complex set of variables, many of which are totally unpredictable. That's why the only people consistently making money in the commodity markets are the brokers, who collect a commission for executing the trade regardless of whether it wins or loses. There are also a handful of successful professional traders who make a living in these markets. But the vast majority of people who dabble in commodity futures lose money.

Unfortunately, with the lure of huge returns and easy money, a fresh crop of innocent traders enters the market each year, only to be quickly fleeced out of their money. Don't be one of them! Leave commodity futures trading to the professionals and stick with the more boring forms of investment, such as mutual fund investing or stocks and bonds.

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Introduction Books

Commodity Futures and Options - A guide leading the reader through the markets and strategies to become proficient at commodity futures and options trading. Outlines various methods designed to help the reader spot profitable market patterns, and provides insight into the mind of the professional commodities trader.

Futures 101: An Introduction to Commodity Trading - FUTURES 101 tells how money is made and lost in today's fast-paced futures market.This is all about commodity futures trading, a financial arena bigger than the stock market yet relatively unknown or understood.Profits, pitfalls and dozens of subjects are covered in detail. Some examples even have sprinkles of trivia and smiles for clarity and to keep the reader awake. FUTURES 101 is also used in private seminars, broker sales training, and college courses.

A Complete Guide to Futures Market - Focusing on price-forecasting in the commodity futures market, this is the most comprehensive examination of fundamental and technical analysis available. Treats both approaches in depth, with forecasting examined in conjunction with practical trading considerations.

American Investment Training - Futures and Commodities Broker License

Revealed: The mindset and processes used by the big institutions when trading the Forex market.

Forex Trade Signals Trade critical news releases for 70-340 pips average per month profits... Make more money with a lower risk of loss, in a less stressful manner, and in a fraction of the time you probably devote to trading now... ForexLiveOnTheNews.com