Commodity Trading Advisor

If you are interested in trading commodities but are not an investment professional, you may want to use the services of a commodity trading advisor, or CTA. These investment professionals guide you in the trading of commodities. A commodity is any resource that comes from the earth. There are hard and soft commodities. Hard commodities are mined from the earth and would include precious metals. They can be recycled into other forms. Soft commodities are consumable items like wheat, corn, oranges, coffee — anything that is grown, consumed and not recycled. Your CTA will understand everything there is to know about hard and soft commodities and may or may not have an area of specialty.

Something a commodity trading advisor will know a lot about are futures. Futures place an obligation on a seller to sell a commodity to the buyer on a specific date. Commodity futures are risky, because basically you are making a prediction about the direction in which the value of a commodity will go. Futures trading is nothing new, and can be traced back to ancient Greece. Today, the futures market is booming but is not without risk. This is why the services of an experienced advisor are recommended. Your advisor can not only make recommendations but execute transactions on your behalf.

A CTA must be competent at predicting how a certain commodity is going to go over a certain period of time. For any commodity investor to be successful this is a very important skill to have. Your advisor will understand what causes various commodities to rise and fall in value. That way, he or she can choose the futures contracts with the most profit potential. This means knowing when to buy a contract and when to wait on one. While this is something you may be able to teach yourself with enough time and practice, you stand to lose a lot of money without a professional advisor by your side.

Commodity trading advisors are well educated, trained and hold a license to trade commodities and futures. This may include index and bond futures as well. CTAs can work not only with individuals, but also with companies, groups or partnerships. The level of involvement the advisor will take often depends on the preferences of the client. Some clients will basically hand over the reins to their advisor and not require much input, others will want to be an integral part of the process. It all depends on how much time you want to spend learning about commodities and futures trading and how involved you want to be with your portfolio.

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