What do commodity traders make

Thinking about a career in commodity trading? At the most basic level, a commodity trader is a sales professional who buys and sells commodities. While there are different types of commodities to trade including everything from lumber and metals to oil and sugar , commodities markets typically deal in agricultural products or other raw materials used in the early stages of the production chain.

Commodity traders buy and sell commodities on the stock exchange. That said, different types of commodity traders have different goals. Some work for trading firms and operate on major exchanges, some work for large commodity producers with the goal of selling off their product, and some exclusively play the market, attempting to make money off market changes without having a specific need for the actual commodity in question.

At AIFP, our commodity traders work to secure a supply of raw materials like lumber and steel for our commercial customers. In addition to closely watching market trends and reacting to market events, our traders leverage their relationships with mills and other suppliers to get the best product at the best price.

Many firms prefer beginning traders to service smaller accounts. After learning on the job and gaining practice buying and selling commodities, traders get moved to larger accounts for financial institutions.

Find jobs. Company reviews. Find salaries. Upload your resume. Sign in. Career Development. What is a commodities trader? What does a commodities trader do? Performing buy and sell orders for commodities over multiple exchanges Operating software tools and platforms for option trading Marketing services to new and existing clients Networking with other traders and investment professionals Using financial publications to analyze market conditions Mentoring trainees in the commodities industry Communicating with clients before, during and after trading Providing advice to clients regarding the buying and selling of commodities Understanding futures contracts.

What skills does a commodities trader need? Knowledge of investment formulas: Commodities traders need to make calculations using various formulas as they decide whether to buy or sell items based on their current cost or value. Understanding of commodities trading processes: Earning a commodities trading license and working as a broker requires in-depth knowledge of the way goods are valued and sold in markets. A trader should understand how this complex investment process began and the ways commodities influence the economic structure of domestic and foreign markets today.

Critical thinking: A commodity trader must be able to analyze and determine if a trade is worthwhile. They must also help clients know when the sell or buy commodities depending on their values. Understanding of sales techniques: Since commodities traders often need to find their own clients, they should understand how to initiate a sales call and network with potential leads to gain new customers.

Decision-making abilities: Commodity traders make decisions to represent clients. These choices have a large financial impact and need to be carefully considered but also made quickly in the midst of a hectic trade floor or online trading platform. Chuck Kowalski is an expert on trading strategies and commodities for The Balance. He has more than 20 years of experience in the futures markets as a trader, analyst, and broker, and has written market commentary for SeekingAplha.

He is a graduate of Florida State University. Compensation for commodity brokers is generally on a commission basis; this means they receive a percentage of the gross commissions from the trades placed by their customers. Commissions are the fees associated with the execution of buying and selling orders. While some commodity brokers are highly successful, and many brokers fail in the first six months, it is misleading to look at industry averages to come up with an accurate estimate of what a typical commodity broker earns.

Commission rates have decreased dramatically since the late s with the advent of online trading, and that has had an impact on the earnings for commodity brokers. However, there are still many commodity brokers who make an excellent living, and many people desire to pursue a career in this field. Many new brokers starting in the business struggle to earn enough to pay their living expenses.

Starting out means building a book of business, and this can take time. While some can survive the initial economic pain of low earnings while starting out, others become frustrated and leave the business. Building a business first requires an education in the commodities futures business, and then a sales effort to attract customers.

Brokers who have got over the hump of starting a business and have built a reasonable book of business can make a better than average living. Even if these brokers lack excellent sales skills or are mediocre traders, they often can survive in the business. The top tier of commodity brokers often has one of two skills. They are either fantastic salespersons or excellent traders.

While commodity futures contracts provide the most direct way to participate in the price movements of the industry, there are additional types of investments with less risk that also provide sufficient opportunities for commodities exposure. In the most basic sense, commodities are known to be risky investment propositions because they can be affected by uncertainties that are difficult, if not impossible, to predict, such as unusual weather patterns, epidemics, and disasters both natural and human-made.

Commodity Futures Trading Commission. Commodity Futures Trading Association. National Futures Association. Energy Trading. ETF Essentials. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content.

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Measure content performance. Develop and improve products. List of Partners vendors. Your Money. Personal Finance. Your Practice. Popular Courses. Table of Contents Expand. A History of Commodities Trading. Commodities Market Characteristics. Types of Commodities. Using Futures to Invest. Using Options to Invest. Using Mutual and Index Funds.

Using Pools and Managed Futures. The Bottom Line. Key Takeaways Commodities that are traded are typically sorted into four categories broad categories: metal, energy, livestock and meat, and agricultural. In the most basic sense, commodities are known to be risky investment propositions because their market supply and demand is impacted by uncertainties that are difficult or impossible to predict, such as unusual weather patterns, epidemics, and disasters both natural and human-made.

There are a number of ways to invest in commodities, such as futures contracts, options, and exchange traded funds ETFs.

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