For those who are looking for a full service commodity broker, please remember that you are not buying a used car. There is no need to put up with a high pressure commodity broker. I can normally tell in a few minutes whether a commodity broker has a thorough understanding of trading commodities will he or she will look out for my best interests - or, whether he or she is just blowing smoke.
First, you must understand that commodity brokers get paid on commissions. That means for every trade that you place, the broker splits the commission with his brokerage firm. Therefore, the more trades you place, the more money he or she makes. Also, the more accounts a commodity broker opens, the more money he can potentially make. So, some unscrupulous brokers resort to high-pressure sales techniques to satisfy their need for greed.
Many commodity brokers are also poor traders and consistently lose money for their clients. This leads to a perpetual cycle where they have to continuously open new accounts to replenish their accounts that get wiped-out. It is also common to see commodity brokers recommend more trades for their clients in the last few days of the month to squeak out more commissions before the books close each month.
Commodity brokers who consistently make money for their clients or at least do better than the industry averages, usually maintain a loyal client base and add a couple accounts every month with little effort. An almost sure sign of a commodity broker who regularly loses money for clients is one who uses high pressure tactics to open accounts and place trades.
Signs of High Pressure From a Commodity Broker
Constant calling that is on the verge of harassment.This is a sign of desperation. A quality commodity broker will inform you about the markets and how he or she can help you trade. They will also answer any questions you have and then let you make the decision on whether it is the right choice for you.
A broker who tells you that you need to get in the markets now or you'll miss the move of a lifetime.
There have always been and will always be markets that make big moves. Don't worry about missing any moves, because I can guarantee there will always be another one right around the corner. Also, it is probably unlikely that the broker would properly trade the big moves properly anyway.
A broker telling you to picture all the money you will make trading commodities and dream about what you can buy with your newfound riches.
This is a sure sign of a bad commodity broker. You should never dream about the money before it is made, as this almost leads to defeat when trading commodities. Plus, I have yet to see any of these characters deliver the riches. In reality, they are the ones dreaming about how they are going to spend the money they make off of you if you open an account with them.
A broker stresses that you need to open an account the same day.
There is no need to open an account the same day, especially if you are unsure commodity trading is for you. There are plenty of commodity brokers out there to choose from, so shop around.
A broker calls you and tells you about the big move you just missed yesterday, because you haven't opened an account yet.
This is a common tactic from unscrupulous brokers. It makes them look like an expert commodity trader and it puts pressure on you to open an account. This is not a tactful way to deal with prospective clients. I would ask the broker for their next recommendation and tell them you'll see if they are more than a one hit wonder.
If you are ever in doubt as to the ethics of a commodity broker or whether you feel he or she may be using high pressure tactics, you should at least check the background of the firm and individual broker. This can be done through the National Futures Association. You can call or visit their website, where you can find out whether complaints have been filed against them in the past and the amount of complaints.
