Commodity Futures Trading

Find a commodity trading platform as an alternative to the stock market

By Trisha Schulz

Commodity futures trading, said to be less risky than playing the stock market, appeals to those who want simpler trading options. Whether it's metals, grains, livestock, currencies, energies, financial, softs or single stock futures, there's an option to suit your individual investment goals.

Focusing on one commodity market makes trading far less complicated and more productive. Most profitable traders started out in mastering one particular market. On the other hand, the stock market carries individual stocks, each with its own characteristics and volatility. For example, stocks can plummet due to one random event, while in the futures market, the global economy moves may cause occasional shifts, but price trends are generally stable over the long run.

Before jumping in head first, take some time to consider the following:

1. What are your investment goals? How do you see commodity trading help you reach your goals?

2. What is your risk tolerance when it comes to potential losses in commodity futures trading?

3. Do you prefer trading yourself or will you consider hiring a commodity future broker?

Learn about commodity futures online trading

No one can predict perfectly the direction of prices. If you could, you'd have no problem making a fortune in futures. Your best option is to learn as much as possible about the forecasting techniques used by successful traders to determine when to get in and out of the market. Research commodity trading software and how that tool will help you better predict the market.
Try: Request free information from Managed Futures Specialist, or learn the "10 Dos and Don'ts of Trading Futures" from RJO Futures. See the list of resources at Go Futures for other links used by commodities traders

Develop a commodities trading plan

Develop a well-thought-out plan from a careful analysis of the market. Analyze your goals and determine the size of your account. Ask yourself if you're able to afford losing whatever is invested there, and set rigid risk parameters. Once you develop the plan, stick to it. Discipline is key to becoming profitable from the futures commodity market. Utilize commodity trading software to help you monitor your futures market.
Try: Keep informed on changing commodity trading techniques with a free investor newsletter from the National Futures Association.

Begin to practice with a commodity trading platform

Many commodity trading companies offer simulators that let users practice first before using real money in the commodity futures market. Since there is much potential for gain as well as much potential for loss, it may be best to try it out first for free.
Try: Sign up for a free demo account from Insignia Futures and Options.

Determine if you'd rather use a commodity future broker

Brokers provide the knowledge and expertise needed to survive the commodity futures market. It may be best for beginners to use the support of a broker. If you decide that a broker gives the best option, make sure you discuss the level of support you are comfortable with as well as associated fees.
Try: Get background and status information on a potential broker from the National Futures Association.

Because every trade comes with a price tag, don't be constantly getting in and out of a particular commodities trading market. You will rack up commission and exchange fees, among other charges.