Commodity traders are financial professionals who buy and sell commodities. Although some traders will take delivery of commodities, transport the goods, and then resell them at a profit, most only trade commodities on paper, by buying and selling commodities on a financial exchange. When sold on a financial exchange, commodities are sold in the form of futures contracts, which guarantee the bearer delivery of a set amount of the commodity at a particular date in the future. Traders purchase and resell these contracts like any other financial asset. Becoming a trader is relatively easy, although becoming good at the profession is very tough.
Get an education. While a bachelor's degree is not absolutely required to trade commodities, it is almost essential to getting a job with a reputable firm. Also, much of what you learn in your classes can be directly applied to your future career. According to the Bureau of Labor Statistics, many traders choose to major in a field closely related to commodities trading, such as economics, business, or agriculture. If you have an idea of what kind of commodities you want to trade--for example, oil and natural gas--build your class schedule around this goal.
Get a job with a trading firm. In order to gain essential experience trading, you should take a job with an investment bank or financial services company that trades commodities. Try to get a job on the commodities trading desk or in a closely related department, such as analysis, that will position you for a transfer. While at the company, develop connections with other traders with deep experience in the market. If you can, find yourself a mentor who will be willing to tutor you in the field.
Get a license. Although some commodities traders will fill orders through a broker, many choose to cut out the middleman and place their own orders. To do this, you must take and pass the Series 3 examination--similar to the Series 7 exam taken by stock brokers--which is administered by the National Futures Association. The test is divided into two parts, one of which tests you on your knowledge of the market and the other on trading regulations.
Strike out on your own. Although many commodities brokers work for a company for their entire careers, trading for an employer limits the amount of money they can earn from their trades. Bolder commodities traders will start their own trading companies. To do so, you will need to be well-capitalized. While you can trade with your own money, it is less risky to trade with other peoples' and take a cut of the earnings.
- Bureau of Labor Statistics: Securities, Commodities, and Financial Services Sales Agents
- Forbes: Creating A Career With Commodities
- Investor.gov. "Commodities." Accessed June 19, 2020.
- United States Department of Agriculture. "Commodities & Products." Accessed June 19, 2020.
- Commodity Futures Trading Commission. "Main Categories of Commodities." Accessed June 19, 2020.
- National Futures Association. "Registration and Membership." Accessed June 19, 2020.
- Commodity Futures Trading Commission. "Customer Advisory: Learn About Risks Before Investing in Commodity ETPs or Funds." Accessed June 19, 2020.
- Commodity Futures Trading Commission. "Fraud Advisory: Foreign Currency (Forex) Fraud." Accessed June 19, 2020.
- Commodity Futures Trading Commission. "Before You Trade." Accessed June 19, 2020.
Michael Wolfe has been writing and editing since 2005, with a background including both business and creative writing. He has worked as a reporter for a community newspaper in New York City and a federal policy newsletter in Washington, D.C. Wolfe holds a B.A. in art history and is a resident of Brooklyn, N.Y.