How Do I Become a Futures Broker?

Become a Futures Broker

Becoming a futures broker is a big undertaking that requires a substantial investment of time, money and energy. This career can be lucrative, especially if you have the skills and knowledge to make the right trades. However, it’s also important to know the risks involved in trading commodities. A savvy investor can avoid many of the common mistakes that can lead to costly losses by following these tips.

Commodity brokers research market trends and try to predict whether prices for specific commodities are likely to rise or fall in the near future. They then arrange a contract to sell or buy certain quantities of the commodity at a predetermined date in the future, usually at a price that’s higher than the current market rate. This is how the commodity broker makes a profit and earns a commission.

A successful commodities broker is an intelligent, detail-oriented individual with sales skills and a desire to separate himself from the crowd. He must be able to comb through reams of market reports and charts in order to fully understand the mechanics of a particular commodity. A good broker is also a hard worker and can devote long hours to the job without losing focus.

How Do I Become a Futures Broker?

The first step in becoming a commodity broker is passing the Series 3 exam, which tests general futures market knowledge and also covers rules and regulations. The examination can be found on the National Futures Association (NFA) website. Once you pass the exam, you must register with the NFA as an associated person. This is a significant step that should not be taken lightly, as it’s the gateway to your career in the commodity brokerage industry.

As a futures broker, you will be able to take advantage of leverage, which is the ability to trade with more capital than you actually have on hand. This allows you to increase your potential for profits, but it can also magnify your losses. Some brokers offer a maximum leverage size that you must not exceed, which can help manage your risk.

Traders should set up a system of emergency orders so that a commodity will automatically sell when the market reaches an undesirable level. This can help fight the natural tendency to stay in a position for a little longer, hoping that things will turn around. It is also a good idea to use a paper trading account so that you can test out your strategies with “virtual” dollars before investing real money.

When choosing a commodity broker, look for one that offers an advanced trading platform, high-speed execution and access to the global markets. In addition, consider the broker’s customer service and educational resources. You should also check the fees and commissions that the broker charges for his services. These fees include non-trading fees, such as the account maintenance fee and deposit/withdrawal fees. TD Ameritrade, for example, is a popular futures broker that provides a range of educational resources and a user-friendly trading platform.