How do I choose a commodities broker?

When you decide that you want to trade commodities with a broker, there are two primary factors to become familiar with. These are: The type of instrument you choose will depend on whether you want to take physical ownership of an asset (eg, bullion) or trade on its price movements — as well as the contract commitments you’re willing to undertake

What do commodities brokers do?

A commodity broker is a firm or an individual who executes orders to buy or sell commodity contracts on behalf of the clients and charges them a commission. A firm or individual who trades for his own account is called a trader. Commodity contracts include futures, options, and similar financial derivatives.

How much money do you need to trade commodities?

Margin trades allow a trader to put up a defined chunk of money to execute a larger trade. A broker’s ‘margin requirement’ on a $1000 gold CFD trade is at 5%. The trader would need to deposit 5% of $1000 to open the trade, which comes to $50. Leverage in trading is expressed as a ratio and is determined by the margin value.

What is the difference between an introducing broker and a futures commission merchant?

The broker or the brokerage firm holds their private and commercial clients’ funds to a margin similar to how broker-dealers do. The introducing broker or the firm never directly holds the client's funds. Instead, they do so through an FCM since traders sometimes prefer not to work with FCMs.