by Daniels Trading| Futures 101
The world’s commodity markets are exciting arenas specializing in the trade of earthborn raw materials. However, be aware: Commodity trading can be a full-contact sport in which only the fast, smart, and bold survive.
The financial rewards of commodity trading are extremely enticing. Astute traders develop the skill to leverage their risk capital into robust returns on a daily, weekly, monthly, or yearly basis. If these diverse markets have attracted your interest, then read on to learn the first two steps necessary for beginning your trading career on the right foot.
Step 1: Find a Strong Commodities Broker
When you’re first starting out, becoming acquainted with the market is job one. Although reading articles and watching webinars is useful, working with a true professional is invaluable. By far, one of the most important things you will ever do as an active commodities trader is to select a strong broker.
So what does your ideal broker look like? The answer to this question depends on your specific goals, but strong commodity brokers all possess three critical attributes:
- Experience: The market is an ever-evolving atmosphere. Working with someone who has been through its ups and downs makes doing business much more efficient.
- Product knowledge: Commodity trading is a discipline all its own, unlike buying and selling stocks or forex pairs. Your broker should have a deep understanding of the underpinnings driving regional and global commodity prices.
- Excellent reputation: In the information age, checking up on a broker’s background is a straightforward process. For starters, be sure that a prospective brokerage is licensed to operate and in good standing. Second, take time to read customer reviews or talk to actual clients about a firm’s service record and reputability.
Remember, your broker will be your partner in the marketplace. Because your broker does more than just provide market access and facilitate transactions, the broker-client relationship needs to be service-oriented. A good broker is willing to take time out to answer questions and make sure operations are running smoothly. If these basic functions are too big of an “ask,” then it’s time to look for a better alternative.
Step 2: Align Your Resources and Objectives
According to the U.S. Small Business Administration (SBA), about one-third of businesses fail within the first two years of operations. Commodity trading is no different. To succeed, it’s imperative that things go well early on in a new trader’s career.
Of course, theory is one thing, and reality is another. As most market veterans will tell you, fledgling traders invariably lose money. It may surprise you to learn that many high-profile traders and investors went bust multiple times before finally getting it right. However, they knew that although losing money was a part of doing business, losing too much money was the end of business!
At its core, trading commodities is the act of risking capital in the hopes of achieving a financial reward. To accomplish this successfully over the long haul, it’s essential that your resources and goals complement one another. If they do not, the chances of prematurely blowing out your trading account increase exponentially. Answer these two questions (honestly!), and you can begin bringing your resources and goals into alignment:
- How much money do I want to make commodity trading?
- How much money, time, and effort am I willing to put into the markets?
The answers to these two questions will determine what kinds of trading, strategies, and products are best for your specific situation. If you’re strapped for cash and time, maybe swing trading E-micro gold futures is a good fit. If you’re well capitalized, scalping large positions in WTI crude oil may be an attractive approach.
The bottom line is this: It’s tough to make a million dollars trading commodities part-time starting with a four-figure account. However, it may be possible if you’ve got a mid-five-figure account and 40 hours a week to trade. The key is to optimize the potential of your resources in the pursuit of reasonable goals. In futures, small goals and resources can grow into large ones―the only input you need is time.
Are You Ready to Get Started Commodity Trading?
When you’re ready to kick off your commodity trading career, be sure to contact the pros at Daniels Trading. The Daniels team has everything you need to enter the commodity markets with confidence. Whether you’re looking for education, a dt Pro practice account, or a simple conversation, we’ve got you covered.
To get started, contact a commodities market professional at Daniels Trading today!
About Daniels Trading
Daniels Trading is division of StoneX Financial Inc. located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability.
Risk Disclosure
The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.
Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.
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