Advantages and Disadvantage of Hiring a Commodity Broker By Chuck Kowalski, About.com Guide

Many new commodity investors will hire a commodity broker to help with their trading. Others will invest in commodities on their own and use an online broker. It is usually in the best interest of new traders to find a full service commodity broker who can help them learn the mechanics of the markets and achieve profits.

Advantages

• An experienced commodity broker can provide invaluable advice on the markets, accelerating your learning curve.
• A broker can prevent you from making a lot of the foolish mistakes that new traders are prone to making.
• Brokers typically do a lot of research on the markets, so they are able to spot regular trading opportunities that new traders miss.
• A commodity broker’s job is to provide you with a trading plan and make certain you to stick with it. Many new traders will get caught-up in the emotions of the markets and get reckless with their trading. This is a main reason why investors lose money in commodities.

Disadvantages

• Commissions for full service commodity brokers are higher than online brokers.
• A broker might make bad trade recommendations and consistently lose you money.
• Commodity brokers typically have many clients and they are usually prospecting for more. Therefore, how much time can they devote to you? It’s a common complaint in the industry that brokers do not communicate with their clients enough.
• Making money is the major concern of most commodity investors. When you hire a broker, you have no certainty if his/her clients consistently make money. Commodity brokers will not give you a track record of client performance, as it is almost impossible since every client might have a different trading strategy.

New commodity investors are usually better off hiring a full service commodity broker. Take the time to evaluate a broker thoroughly before you open an account. And, if you are not satisfied with a broker you hire, do not be afraid to look elsewhere.