 |
|
|
|
|
Choosing a Commodity BrokerWhether you will be using a IB (Introducing Broker) or an FCM will matter, as will other factors such as the account type you are seeking. Before forming the new account, it is crucial that each potential client and broker discuss the customer needs, trading knowledge, background, experience and respective style, along with willingness to assume risk and risk reduction methods, among a host of other factors. Experience, Knowledge & Track Record This is the nuts and bolts background of the broker, in terms of years of experience, starting from the beginning, rather than something akin to “the last three years”. Does this experience cover your particular commodity contract of interest – whether in the US markets or international exchanges? The broker track record over this term along with how performance is being measured should prove to be revealing. Although, it might not be realistic to have such a record divuldged, and, indeed it might be hard to quantify. Its always important to become aware if there have been any disciplinary actions taken. Check with the disclosure statement, the NFA and the CFTA and any possible actions and/or complaints registered against them. Actual Trading Concerning the brokers style of trades, there are those that are more technically-oriented and those focused primarily on the fundamentals. Then there is the speed at which orders will be placed, filled, and confirmed. Also, about your portfolio; what sense of thoroughness and at what frequency will it receive reviews and suggestions. All are important considerations. Platforms There are brokers that offer third party platforms and those that offer proprietary platforms. While reliability normally ranks high for most traders – is a platform you are already familiar with, provided? It could be time to review platforms. Also how rapid are the updates, and is there is a direct floor connection. Availability Serious brokers are reachable during most times, and on short notice if need be. Markets move suddenly and volatile in certain situations, so communication can't be taken for granted. Client Roster The broker deals with other clients but what are the number and makeup of the other client portfolios being handled? Discussing this could bring to light, some alotment of professional service likely given you. If it is discovered that the roster is sparse, find out why. For the quite busy broker; how did the clients find their way to the firm? Will you as a new client be provided the proper service? Personality & Trust/Integrity Is the broker someone with whom you feel comfortable dealing with, and with whom you trust, especially if signing a power of attorney for trading on your behalf. Don’t be afraid to get personal. If for no other reason, than to unearth motivations and their sense of dedication. For honing in on your concerns, long term references can be a great help . Fees & Costs There are minimum amounts required to start trading and these range drastically. The amount established will depend on the account type and brokerage. If possible, have a current schedule of all possible fees, everything from; per trade fees to platform-related fees to commissionable trade charges, not forgetting administrative fees. At this stage, while you would be new to any firm, since brokers are known to charge reduced fees for devoted customers, when might rates be ticked down? All the while being mindful of the fact that what amounts you invest may be lost. |
