How To Choose The Right Commodity Broker


The popularity of commodity market has grown immensely in the last two decades in the U.S. It has one of the most developed commodity markets in the world. There are more than 1500 commodity brokers in the U.S and a majority of them are concentrated in the Chicago area. It’s the main hub of commodity trading in the U.S. Commodity trading is a highly specialized job and not all brokers are equipped to deal with it, that’s why the task of selecting the right commodity broker becomes difficult. Here are the following tips to select the right online commodity broker:

Check The Site Responsiveness

Commodity trading is a high risk trading as the leverage is quite high in the case of futures and options contracts. The speed of execution really matters a lot. Traders can’t can’t afford even 1 second latency in the trading system. Many traders prefer a low brokerage rate and often ignore the effectiveness of the trading system. Such attitude only harms in the long run. Therefore, check whether the internet connection is fast enough.

Check The Quality of Execution

Check whether the broker provides the National Best Bid as required by the Securities and Exchange Commission. According to this requirement, it’s important for the broker to provide the best bid buy price while selling securities. Know whether the broker can guarantee this.

Check Brokerage And Other Charges

If all things are similar in two brokers, opt for the broker that offers a low rate and also provides the volume discount if your trading volume exceeds a certain threshold level. So, if you are a daily trader and place orders frequently, it seems a sensible option to opt for a low rate broker. In fact, you can save a lot with a low brokerage rate.

Simple User Interface

Commodity trades are done in futures and options as these are considered a type of derivative trade. These trades involve intricate concepts such as limit order and mark to market. In such a scenario, the situation becomes really complex when you are puzzled over to place the order. Make sure that the broker uses a single page order placement form.

Good Charting Software

Commodity trading is done on the basis of technical analysis. The broker’s system should have advanced real time charting facility so that you can analyze your trades quickly and pounce on the profitable trading opportunities as an when they happen.

If you are new to commodity trading, you should research diligently while choosing the commodity broker. It’s the first step towards trading success. Your trading success will be largely decided by the understanding between you and your broker. There will be many situations when you will have to depend on your broker, so you can’t afford to go lax on this front.

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