Companies That Trade Commodities
Commodity trading companies offer users the ability to trade commodities on both the spot market and the futures market. As with all kinds of financial transactions, taking large risks and the potential for great returns go hand in hand. However, commodity trading companies often offer discounts and exceptionally low fees, making commodity trading a relatively cheap option.
Spot Market vs. Futures Trading
Commodities are tangible items, such as agricultural produce or precious metals. When the item is traded on the spot market, there is the expectation that the item will be delivered as soon as possible. Since most people have no interest in owning that much raw product, they trade instead on the futures market. Commodity future trading involves a contract which specifies at what point the item will be purchased and for what price. Though the investor would be obligated to purchase the product on the contractís expiration date, most futures contracts are sold before they expire.
Self Service Accounts
There are many online companies that offer self managed commodity training accounts. With such an account, the investor calls up the broker and specifies all the details of the trade, and the brokerís job consists of nothing more than actually carrying out the transaction. Self service accounts are typically associated with fewer fees and lower commission rates. The discount may seem tempting, but determining how, when, and where to invest takes skill and practice. As a result, those with little or no experience in the field should consider a managed account instead.
With a managed account, the broker does much more than just the transaction itself. The broker will provide clients with explanations of how the market works and in what direction a particular commodity seems to be headed. S/he will help the investor diversify his/her profile and reduce risk. Managed accounts are great for those who donít want to be bothered with the details of commodity trading, but it requires a great amount of trust in the broker. In addition, managed accounts typically have higher commission rates and other fees.
Local Commodity Trading Companies
When looking for a broker, the instinctive reaction might be to find a firm that is located nearby. Using a local broker allows you to meet the broker personally and conduct business face to face. However, trading companies tend to be clustered near the big cities and/or the major trading floors and it may be difficult to find a broker in your specific area. In addition, since the vast majority of trading is done online and even a local broker will probably prefer to conduct most business on the phone or via email.
Online Commodity Trading Companies
Many people prefer online companies and the option of a self service account. In addition, using an online company allows investors to shop around for the best rates, and many online companies offer discounts. It is important to remember to treat online commodity trading companies with the same caution you would give to any transaction. Double check the credibility of the broker before agreeing to do business with him/her. Check out what company s/he is associated with, how long the company has been around for, and what customers are saying about them.
Commodity trading companies are brokerage firms involved in the buying and selling of commodities. Though the commodities themselves can be bought and sold, most people trade commodity futures. The commodity trading is typically done through commodity trading companies, which, not surprisingly, take a percentage of all sales. The exact percentage varies by firm, and is partly based on how involved the brokers are in the sale.