Futures Brokers – Commodity Trading Account Types

There are several types of accounts offered by futures brokers, or FCM. The accounts are structured differently from broker to broker, which gives accounts that vary by size, fees & commission schedule(s), charts, data and news and other services provided. Indeed, with brokers trying to provide increasingly higher levels of service to attract new clients to their place of business, hybrids springing from the main account types aren't that uncommon.

Managed Futures Accounts: The managed accounts are popular among traders who either lack experience or who cannot provide the commitment to manage everyday trading activities of the commodities. The account is managed through power of attorney by a licensed CTA (Commodity Trader Advisor) specialist, whereby the professional manages and trades futures contracts on your behalf, as well as offering advice. Doing this for you and other client accounts.

Another main type of managed account is by the CPO (Commodity Pool Operator) whereby you join other investors among the same account that have all been ‘pooled’ as a single account. The CPO managed account offers the advantages of sharing in large amount, asset buys, and the ability for greater diversification. Some might argue, involving only the potential loss of principal amount(s).

Aside from the CTA/CPO lines, the beginning trader has other ways to access investing in commodities. Like by way of investing in commodity mutual funds, and the ETF, or the Exchange Traded Fund, which has gained widespread appeal over the past several years; offering tracking of grouped or individual commodities like gold and silver even. As well, the investor can trade in the commodities companies themselves.

Broker Assisted Accounts: These are exactly what the name implies. A broker assists the trader in placing the order to help prevent any errors and, perhaps talk goes on between the broker and client about the trade, with the broker lending his or her knowledge and experience in a limited sense. Typically, the broker assisted account does not offer the degree of broker service as a full service account. Nor does it incur the pricing of a discount account.

Full Service Accounts: The full service account normally offers monitoring of the account, ordering trades, and with updates given by the broker. Greater interaction is given the client (over broker assisted) and this can include providing recommendations and guidance on trading strategy and managing risk. Due to the time and effort commitment from a professional broker, expect to pay the most for full service.

Discount Accounts: These are for traders who are experienced and understand commodities products and wish to assume control over their own account, without the help of a broker. Here the trader acts independently, managing the account through a trading platform while having direct access to the commodity exchange products. The trader executes trades electronically to the futures exchanges via a pc – and now, even by cell phone by some brokers Usually, access is provided to a customer service desk for giving updates and taking orders, that the trader him or her self places. The customer might even have a connection with the trading floor.

Although the client is at the lead of this self-directed activity, brokers can be found that offer these accounts in combination with access to news, charts, quotes and research for your use. These accounts likely carry minimum investment requirements and minimums of trading activity.

Additionally, accounts are setup for individuals/sole proprietors, as joint accounts, and as general & limited partnerships. For someone trading for another’s benefit there is the trust account. Corporations may trade as well.

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Futures Brokers – Commodity Trading Account Types