Choosing a Commodity BrokerThe first thing you want to do is choose a commodity broker. Almost all commodity brokers offer online trading, but there are some that specialize in online trading. I am currently using TradeStation for my trading. They have an excellent trading platform for charts, quotes, strategy analysis and order entry. There are many other online brokers that offer a good product, good service and low commission rates. I also like Interactive Brokers and Daniels Trading.
Commodities Account PaperworkEvery commodity broker will require you to complete the account forms to open an account. The forms mostly consist of your financial information and the risks involved in trading commodities. Your financial information is important as commodities are highly leveraged and there is a chance you can lose more money than you invest. Therefore, the broker wants to know your income, net worth and credit worthiness.
Not everyone who completes the account forms will be allowed to open a commodities account. The broker may use its discretion on whether they deem you an acceptable risk and whether they feel you are suited to trade commodities. The greater your income, trading experience and credit worthiness, they better chance you have for approval.
Before You Start Trading Commodities OnlineOnce you chose a commodity broker to trade online and get your account approved for trading, you will have to fund the account. There are many theories on the account size you should begin with, but it is completely up to your comfort level and risk tolerance.
Now, before you begin trading real money, I would strongly suggest that you have a well researched trading plan in place before you risk any money. I would also recommend using your commodity broker’s simulated trading platform before you start with live trading. This will get you familiar with placing orders and it could save you from making some critical order entry errors with real money.
My final words of advice before you begin trading commodities online is to choose your trades wisely and avoid overtrading. If you find yourself placing a flurry of trades and look back at the end of the day wondering what happened – you are overtrading. That is one of the greatest downfalls of most commodity traders.