Which Should You Opt for ... Commodity Futures
Trading System or a Broker?
Commodity trading can be done through discretionary ways or use of systems. If you do not have the basics to trade in commodity markets, you would better use a system or a broker. The question as to whether you should use a system or a broker depends on personal preferences and also from the experts’ point of view. Brokers can perform just as good as the systems. Therefore, which should you go for?
One aspect traders need to learn is that the systems are created by people who are experienced and advanced in commodity trading. Brokers on the other hand have mastered the techniques of trading profitably. If you choose a broker, you should ascertain that the trading patterns that have been recorded in the past years show good performance. A revered commodity trading broker is one who has been in the market for a many years.
There are brokers who have been there for more than 15 years. These have survived in the trade by excellent and not by chance. Therefore, you have to scrutinize the past performance of the broker. You also have to check on the liquidity demands. There are brokers who ask for extremely huge sums of money, which many traders on commodity market may not be willing to risk.
One thing with commodity futures trading is that losses are part of the process. They cannot be eliminated but they can be minimized. You should also learn the worst drawdowns that the broker has ever witnessed and how they affected the liquidity. If you gather this information, then you can make a decision on whether to use a broker in trading.
You must trust the broker in order to be able to engage in this trading. Similarly, if you are using a system in trading, you need to test and evaluate its worthiness. There are many systems in the market and not all can offer good results. You also have to back test the system. This helps demonstrate the hypothetical history performance of the system.
The system might only have been created a few months ago, but it can show how it could have performed if it was created 20years ago. This gives the past performance of the system and helps determines if it is a viable trading program to adopt. In addition, you also need to stick to the rules of the system.
With a system, you have to follow the rules. With a broker, you have to entrust the broker to do the trading and therefore, you can count on the expertise of the professional trader. A system is more or less the same as a broker only that you take some responsibility. Although there are systems, which can even execute and close a position for you, there are others which you have to enter and exit the market by yourself.
Therefore, the use of commodity trading systems and brokers may be more of personal preference, a thorough research as well as advice from the experts. Brokers are humans and they can still record erratic trading results that can lead to untimely losses. Systems on the other hand can still suffer from unexpected market changes though these happen rarely such as during wars and therefore, they can be mitigated.