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What should I look for in a Commodity Trading agent?

Home » Investing » Commodity Trading » What should I look for in a Commodity Trading agent?

You’ll first want to determine whether a particular agent meets the licensing requirements of the Commodity Futures Trading Commission. The commission occasionally allows exemptions from those requirements, but such exemptions are unusual. The commission also requires agents to provide a risk disclosure statement to potential investors. The disclosure statement discusses the potential problems with commodity trading, so be wary of any agent who downplays its importance. Assuming that your agent is licensed, you’ll also want to ask the following questions:


  • What is the history of the broker or merchant? The risk disclosure statement should include information about the track record of the agent. Although it’s certainly true that past performance is no guarantee of future results, you’d probably prefer to retain an agent with a proven track record of success.

  • How often will I receive information from my agent? You should expect to receive mailed reports of any activity and monthly reports of your holdings and market position. Make sure that your broker is also willing to provide that information on a daily basis.

  • When can I withdraw my funds? In an individual account you normally can’t withdraw funds until trades are settled, but you should be allowed to withdraw funds over and above your initial margin amount. Withdrawals are often more limited in a commodity pool, so make sure your agent is willing to discuss the specifics of withdrawal from any commodity pool.

  • What are my potential losses? As discussed above, the leveraged nature of commodity futures results in losses that are potentially greater than the initial investment within an individual account. However, your losses in a commodity pool may be limited to your investment, so check the disclosure statement of the pool in question in order to determine the agent’s policy regarding pool loss.



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