There are a number of different types of online commodity brokers available for trading the markets. There are full-service brokerage firm, there are discount brokerage firms, deep discount brokerage firms, introducing brokerage firms and so on. Finding the right type of broker is important for trader’s success.
Online commodity brokers have definitely made commodity and futures trading more popular and easier. Now traders can trade markets from their home and also from anywhere they want. They can get more dynamically updated market information right on their computer screen and can get their orders executed much faster than ever. Online traders can use much more trading tools and analyzes for finding the right commodities and trading opportunities.
There are a number of different types of online commodity brokers available for trading the markets. There are full-service brokerage firms which offer online commodity trading,
there are discount brokerage firms, deep discount brokerage firms, introducing brokerage firms, product and market specific brokerage firms and so on. Finding the right type of broker is important for every trader’s success and for that the trader should carefully consider his options. There are a number of things which should be considered when choosing the right online commodity futures broker, which are discussed below.
Type of brokerage firm – full-service brokerage firms allowing online commodity trading is good option for traders who are less-active traders (investors or hedgers) and who do not have much trading knowledge. Discount brokerage firms are good option for experienced and active traders.
Services of Brokerage firms – evaluation of brokerage services is important. Services include timely order execution, assistance in making trading decisions, extended hours trading or around the clock trading, margin and leverage offered, different order types, access to various markets, etc.
Products – There are a number of commodities available to trade online. Some brokers offer access to trading a limited number of commodities while others offer access to trading all commodities. Different commodities include financial, energy, agricultural, currency-related, equity-related and metal commodities. Carefully analyze this as brokers differ considerably on the products they offered.
Costs – costs to consider includes order execution fees, interest on leverage, type of trading plan (per trade, per share, etc) and account maintenance costs. It is good to avoid brokers who charge hidden charges. Generally the costs of trading differ with account type and products/markets traded. Remember trading costs differ with and within a broker.
Account types – There are two types of commodity trading accounts available as mini trading accounts and standard trading accounts. Account size, margin, contract size and trading costs can vary with accounts. Mini accounts usually have relaxed account requirements and small contract sizes (one tenth of standard account) and thus can provide more flexibility to an ordinary trader. Remember most brokers allow traders to trade both mini and standard contracts from single account; some even let you to trade stocks, bonds, funds and options from one account.
Trading systems – There are mainly two types of online trading systems available, web based systems and installable system. Web based system best suits investors, less-active traders and hedgers as it will be cheap with less but necessary trading tools. Installable trading systems best suit active traders like day traders as it will be more tools and real-time market access. Key things to look for include stability and reliability; the best way of analyze them is by demo trading on the trading system.
Broker customer service – All popular brokerage firms are known for their superior customer service. Good customer service means lesser strain and better chance of profitability and thus no compromise on that is recommended.
