Learn How To Become a Commodities Trader

How to become a commodities trader
  1. Get an education to increase your career potential. …
  2. Earn a position with a commodities trading company. …
  3. Register and test for a commodities trading license. …
  4. Gain experience as a commodities trader to advance your career.

You need a bachelor’s degree in business, economics, or finance to work as a commodity trader. You are a more competitive candidate if you have a master’s or even a doctoral degree. Along with work experience at an investment firm, additional requirements include registration and licensing with the Financial Industry Regulatory Authority (FINRA). Commodity traders demonstrate a variety of abilities, including strong organizational, communication, and analytical skills. To efficiently expand a client’s investment portfolio, you collaborate closely with other commodity brokers and clients.

How to become a commodity trader (by a former commodity trader)

What does a commodities trader do?

Traders in commodities either buy goods from physical markets where bidding takes place on the “exchange floor” or from virtual markets where trading in commodities takes place online. Depending on the state of the market, they decide quickly about which trades to make.

A commodity trader observes the bull and bear market cycles, in which prices rise and fall in response to a variety of economic factors, including politics, the environment, and consumer spending. They analyze current market value trends and trade commodities on both domestic and international exchanges.

A commodities trader may also be in charge of any of the responsibilities listed below:

What is a commodities trader?

An investment broker who purchases and sells commodities on an exchange market is referred to as a commodities trader. A volatile sector of both domestic and international economies is the commodities market. They are tangible things that are used in the production of energy, food, clothing, jewelry, and other goods. Some examples of commodities are:

Licensed professionals with a thorough understanding of the value of goods and the variables influencing their costs are commodities traders. They are commodity traders or financial investors who serve as clients for large companies or other financial institutions.

What skills does a commodities trader need?

Trading commodities is a specialized position within the financial industry. Customer service skills, critical thinking, and market trend analysis are all crucial components of the job. Working as a commodities trader requires the following skills:

Commodities trader average salary

A commodities trader operates in a setting that is professional and includes trading floors and corporate offices. They are employed by firms that either trade futures or are stockbroker firms. Their work is hurried, and they have to decide quickly on trades based on client preferences and market trends.

Large sums of money are at stake for commodities traders, and they might feel pressure to make transactions profitable as they buy and sell a commodity. They might collaborate with senior management to plan and execute trades for significant clients.

When markets are open, which is typically during regular business hours, a trader is at work. Chicago and New York City, where the majority of national commodity markets and FCMs are based, are home to a significant number of jobs.

How to become a commodities trader

There are several steps involved in working in commodities trading, such as gaining experience on the job and passing exams. How to get started as a commodities trader is as follows:

1. Get an education to increase your career potential

Although it is possible to enter the commodities trading industry without a college degree, most employers prefer applicants with a bachelor’s degree in finance or a closely related field. Many investment firms look for candidates with an MBA for high-level positions. A four-year degree may also be required to be eligible for financial industry certifications.

2. Earn a position with a commodities trading company

Gaining employment with a company or futures commission merchant is the following step to becoming a commodities trader in order to be eligible to take the licensing exam. As a trainee trader, you can learn the fundamentals of purchasing and selling commodities as well as acquire market knowledge to get ready to work on your own for designated clients. Businesses can also provide study materials and practical advice to help you get ready for licensing.

Moving to a major city like Chicago or New York City, where most commodity trading occurs, may be beneficial Many large companies provide internships, which can be a useful way to gain knowledge and establish contacts with a business before being hired.

3. Register and test for a commodities trading license

Once you have a job in the commodities industry, you can take the Series 3 exam to become a licensed commodities trader. After passing, you must sign up with the National Futures Association as an “associated person.”

The Series 3 exam is made up of two parts. Your knowledge of the futures and commodities markets is evaluated in the first section, and the rules governing commodities trading are tested in the second.

Additionally, candidates must complete the National Futures Association 8-R form, which requests documentation of five years of residence and ten years of employment. Additionally, candidates go through a protracted fingerprinting and FBI background check process. Applicants are given a temporary license as an “associated person” or commodities trader after these checks are finished.

4. Gain experience as a commodities trader to advance your career

Once you obtain a trading license, working daily with individual clients in the commodities trading industry can help you gain knowledge and experience. Many firms prefer beginning traders to service smaller accounts. Traders are promoted to larger accounts for financial institutions after gaining experience buying and selling commodities while working and learning on the job.

FAQ

Can commodity traders make money?

Using futures contracts, which are agreements to buy or sell a commodity at a specific price and date, you can also profit from commodities. If you correctly predict the price of the underlying commodity, you can profit greatly from futures contracts, but you can also lose considerably.

How much money does a commodity trader make?

Salary Ranges for Commodities Traders The median annual salary for commodities traders in the US is $202,318. Salaries for these professionals range from $32,680 to $1,131,376. The top 6% of commodities traders earn $1,131,376 per year, while the middle 57% earn between $202,320 and $509,626.

Do you need a license to trade commodities?

Every commodity broker needs to have a license and be registered as an “associated person” with the National Futures Association (NFA). The applicant must pass a test known as the Series 3 examination in order to obtain that license. The NFA website contains the test’s outline form.

How much money do I need to start trading commodities?

You will need to work with a brokerage to access the market because commodities can be volatile. Commodities trading can be entered into for a small investment, but in order to day trade, you must have at least $25,000 in your account.

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