A commodity trader is a career somewhat similar to a stockbroker, except instead of trading stocks, bonds, or mutual funds, you trade commodity futures. In a commodity futures deal, the buyer and the seller agree that a commodity will be sold for a certain price at a certain date in the future.The idea of setting prices in advance appeals to many people because markets can fluctuate quickly. There is no formal educational or work background required to pursue this position. But in order to do the job well, you should have a serious interest in trading markets as well as sales skills and a thorough understanding of financial and mathematical concepts.
Commodity Trader History
While commodity trading may have existed up to 6,000 years ago in China, it did not officially come to the United States until the mid-1800s, when the Chicago Board of Trade was created. Today, there are more than ten trading exchanges in the United States, as well as trading exchanges in more than twenty other countries around the world. In the past, traders traded things like grain or livestock contracts, but now it is common to trade a wider variety of commodities, gold, oil, cotton, sugar, cattle, wheat, lumber, trading silver and other precious metals.Traders usually do not have a need for the specific commodity they are trading. For them, it’s more about gaining exposure and a good reputation among potential clients.
What a Commodity Trader Should Know
If you want to be a commodity trader, you will have to be patient; as with any career, it takes time to acquire the right skills. To gain a good reputation as one, it is a good idea to take the Series 7 test, which is administered by the Financial Industry Regulatory Authority. Another available test is the National Commodity Futures Examination (also called the Series 3 Test). It is possible to hold a license for both of these tests simultaneously. Passing one of these tests is absolutely essential if you want to succeed in this business. If you contact brokerage firms, you will find that many offer study courses or exam prep for the tests. You should also be able to locate study materials for the tests online.
Some people are attracted to be a commodity trader because it has the potential for high financial rewards. But trading commodities also has a reputation as a risky financial endeavor, so it may not be the right career choice for people who are especially risk-averse. It is true that some people have lost large sums through this method, but that certainly does not mean it will happen to everyone. If you are serious about this career path, it is essential that you are willing to put in the time that is necessary to gain a thorough understanding of the market. If you are willing to do this, you will find that this path not only offers an exciting experience but can also prove to be a rewarding career choice.