Becoming a Successful Commodity Broker

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It is not easy to become a successful commodity broker. Many who become commodity brokers do not survive past the first two years. The brokers who work hard and understand what it takes to be successful tend to have long and prosperous careers as commodity brokers.

Being a commodity broker is not just about trading commodities. You have to be a salesman, a market analyst and you have to provide customer service to multiple accounts on any given day. Some days will be absolutely exhilarating and other days you will just be feeding that soon-to-be ulcer.
Opening Commodity Accounts

Most brokers who like to trade the commodities markets really dread opening accounts. This is where the sales end of the business comes into play. By sales, I mean selling the potential clients on yourself and the opportunity to make money in the markets.

First, you need to find out what objective the prospect has in trading commodities. Some are just curious and will never open an account, while a few will already have their checkbook in hand when they contact you. However, most of the prospective clients you will have contact with are serious about trading commodities and it is up to you to give them a comfort level where they will open an account with you.

I highly recommend that you do not hype any markets or fill your prospects with fantasies of getting rich through trading commodities. This will only lead to problems down the road – both legally and the fact that you will have a lot of explaining to do if / when things do not work out.

Above all else - be honest. Answer their questions and equally explain the opportunities and risks. If the prospects like you and believe you are capable of making money for them, you should be okay in this department.
Making Money For Clients
This is where you need to give yourself a cold, hard reality check. If you cannot consistently make money for your clients, you probably should not be a commodity broker. Or, at least you should not be trading discretionary accounts or making all the recommendations for your clients.

If your clients are dependant on you to manage their account and make them money, you should have the confidence that you are doing the job you are getting paid for.

Aside from the ethical issues, you will have to keep replacing your clients if they are regularly losing their money and closing their accounts. That makes it difficult to grow a book of business.

You should be researching the markets daily. People do not consistently make money in trading commodities without a lot of hard work. Read every book you can on trading commodities and design a thorough trading plan for yourself and your clients. Most importantly, you do not have to make your clients rich overnight. You should be shooting for a respectable annual return.

Generating Commissions

This is a fine line that a commodity broker has to walk. On the one hand, if you generate too many commissions in your clients’ accounts, they will stand little chance of making money and you could be charged with churning. On the other hand, if you don’t generate enough commissions in the accounts, you may be working for too little money.

I have always felt that if you do what is best for the client and you consistently make money for them, the commission thing works itself out. A client that is making money is usually a happy client and they will most likely keep trading commodities with you. Therefore, in the long run you will generate more in commissions than trying risky strategies where your client is gone in 3 months.

Servicing Commodities Accounts

Keeping in touch with your clients is vitally important when you are a commodity broker. This is most critical during the bad times, which you will inevitably have. It is easy to contact a client when things are going well and very difficult when a client takes a major hit on his account equity.

Use the golden rule and treat your clients the way you would want to be treated. One of the main complaints of commodity brokers is that they don’t keep in touch with their clients. Many clients feel they only get a call when the broker wants something – like placing a trade and generating commissions.

Believe me, a phone call once a week to each client for an account update goes a long way toward your success as a commodity broker.

Article Source: http://commodities.about.com/od/becomingabroker/a/broker_success.htm