Job Description
Taking up the job of a commodity trading advisor (CTA) is perfect for those who are interested in starting a career in financial services. Generally a CTA is a registered professional who advises people about which commodity should be bought or sold based on his experience and expertise. They also provide consultancy regarding commodity futures trading and contracts options. This is a highly specialized component of the financial services market, and a CTA is expected to be very knowledgeable about investment instruments.
The job of a commodity broker on the other hand is very much like that of a stockbroker, with the basic difference that a commodity broker is involved not in stock trading but rather focuses entirely in but rather focuses entirely on dealing in commodity futures. Previously commodity brokers used to trade exclusively in livestock or grain. Today, however, commodity brokers deal in a wide variety of commodities and industries including gold, Forex trading, currencies and stock indexes. It is important to note that a commodity broker does not indulge in the trade of the real product but rather in what are commonly known as “derivatives”. This way, the investor does not get actual possession of the products that he chooses to invest in.
Job Requirements
For both CTA's and commodity brokers, educational qualifications include a bachelor's degree in finance, and augmenting that with a master's degree is a very good idea.
For CTA's, the following additional requirements are a must:
- Registering as a commodity trading advisor the relevant authority. For instance in the US, that authority would be the US Commodity Futures Trading Commission.
- In order to be considered an active CTA, he must provide professional advice to at least 15 clients in a year.
- To conduct business, a CTA can seek employment in an investment company or start his own independent practice.
- Maintaining documented records of transactions, employment history, files on clients, prospected service fees and information related to marketing.
- Usually, a CTA has to pay an annual registration fee to the relevant authorities and providing services to at least 15 clients annually to stay registered as a CPA.
- They must have good communication skills to interact with people.
- They must be knowledgeable in futures and futures trading
- They must obtain a license to practice from the relevant authority. For instance in the US, that authority would be the National Futures Association (NFA).
- Other requirements like appearing for and passing examinations related to futures trading and strategies, filing forms for scrutiny with the relevant authorities for a background check, and other formalities vary depending upon where the commodity broker opts to practice.
An average commodities trading professional charges an hourly fee ranging around US $44.26, which adds up to an annual income of US $92,050.
A career in commodity trading is fraught with risks since professionals handle millions of dollars in funds, so it is a good idea to hire a good lawyer and it is crucial to maintain the relevant records. Many commodity traders steadily lose money for the first few years, but the trick is to start off with small investments that keep losses to the minimum and to quickly learn the tricks of the trade, for there is a lot of experience to be gained on the job.
