|
Depending upon what type of services you expect to receive from your broker, the selection of the broker will quite possibly be your most important “trade”. And yet, when considering all the farm magazine articles concerning marketing I have read over the years; I cannot recall an article dealing with this subject. The purpose of this article is to start a discussion regarding how to go about selecting a qualified broker. First, I will try to list a couple of “don’ts”, and then start on a list of “do’s”. You do not have to work with a particular broker just because it happens to be his “floor day”, or is next in line to talk with a new prospect when you call, or stop in to ask questions about opening an account. And don’t think you have to open an account right away. Take your time while doing a bit of research and try to get to know your prospective broker(s) before committing your hard-earned dollars. Possibly start small with a contract or two and a couple thousand dollars as a “trial run”. Make that broker EARN your business. Don’t “give” it to him. Also, you do not have to have just one broker. Medical patients often get a second or third opinion; why would your financial health be any different? Pay attention to the broker’s area(s) of expertise. A broker’s particular specialty is very important. If you are in the pig business, for instance, perhaps you have found one particular company or individual who is quite good in the hog market but leaves something to be desired when it is time to cover corn and soy-meal needs. You may then need to shop around for a second, or even a third broker, to help in that area. Do shop around. Do ask questions. Approach it like you are conducting a job interview, which is exactly what you are doing. Ask for references and call those references. Find out how long the broker has been in the industry and some information on the company. Your prospective broker should be able to answer basic questions regarding contract size, expiration dates, report dates and expectations, etc. If he/she does not know the answer, he/she should at least be able to find out where to get it. Searching for a broker is like everything else in life: common sense and work will yield positive results. Experience Counts In my opinion the most important quality to look for in a broker is honesty. Next on the list is experience. I think it was John Madden who said, “The only players who think experience doesn’t matter are the players with no experience.” Unless you are very experienced yourself, in which case a young, competent broker with few accounts would possibly be the right fit for you, you will need an experienced broker. A trader or hedger will have to pay some “tuition”. Why pay for your broker’s “tuition” as well? One other item: Don’t rely too heavily on your broker. You are ultimately responsible for your financial success. And remember the ancient Chinese proverb: “To profit from good advice requires more wisdom than to give it.” Jake Obermeier Commodity Services, Inc. Since futures and options may not be a suitable investment for everyone, and the risk of loss may be substantial, all investors should carefully consider their financial condition in deciding whether to trade. The information contained herein is believed reliable, but is in no way guaranteed.
*This material has been prepared by a sales or trading employee or agent of Commodity Services, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Commodity Services, Inc.'s Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades, statistical services, and other sources that Commodity Services, Inc. believes is reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.* |
||||||||||||||||||||||||
