online brokers

Online Commodity Brokers

Commodities trading continue to be very popular, what with a rich history and an exciting future. For both the newcomer and the experienced trader, a little understanding about Commodity brokers online is always helpful, before they make any investments.

Who is a commodity broker? Well, in simply put words, he is a firm or an individual who executes orders to buy or sell commodity contracts on behalf of clients. He charges them a commission for the executed orders. Commodity contracts include futures, options, and similar financial derivatives. Clients who trade commodity contracts are known as either hedgers or speculators. Read on to know more about Commodity brokers.

In earlier times, the commodity brokers were known to trade grain and livestock futures contracts. But today commodity brokers are known to trade a wide variety of financial derivatives based on foods/softs, metals, energy, equities, bonds, currencies, stock indexes and an ever growing list of other underlying assets. A large part of commodity contracts traded are financial derivatives with financial underlying assets such as stock indexes and currencies.

Firms and individuals who are often collectively called commodity brokers online include:

Floor Broker/Trader: He trades commodity contracts on the floor of a commodity exchange on behalf of a client in exchange for a commission he is acting in the role of a broker.

Futures Commission Merchant (FCM): Accepting orders for commodity contracts traded on an exchange and holding client funds to margin, they work similar to a securities broker-dealer.

Introducing Broker (IB): Soliciting orders for commodity contracts traded on an exchange, they do not actually hold customer funds to margin.

Commodity Trading Advisor (CTA): Any firm or individual that, which advises others, on the trading of commodity contracts for compensation or profit. He is generally the commodity equivalent to a financial advisor.

Commodity Pool Operator (CPO): Operating commodity pools advised by a CTA Most online commodity brokers offer a range of services which can include creating an account, managing the account and executing the orders of the traders. One needs to be very careful while choosing their commodity brokers, for it can make all the difference to their success.

Discount commodity brokers are quite popular, for they offer their clients almost all the services- from opening their accounts and managing them. But they are also less personalized and do not provide any regular advice regarding trading. Deep discount commodity brokers are seen offering minimum service and only trade stocks and options for a flat fee. The trader has to take care of all buying and selling decisions, with discount commodity brokers online.