If you’ve considered diversifying your investments, you’ve probably looked into commodity trading. Commodity trading is a safe way to invest, considering that commodity prices (such as prices for gold) are universal and enduring.

In order to begin commodity trading, it is highly advisable to consult a commodity broker. In case you’re wondering what that means, consult the following list of frequently asked questions concerning commodity brokers.

What are Commodity Brokers?

Commodity Brokers are firms or individuals hired to buy and sell commodity contracts (such as futures and options) for clients. They charge on commission for the sale of valuable commodities, like metals, energy, stock indexes, equities, bonds, currencies and other financial assets.

What is the difference between a commodity broker and a stockbroker?

While people should employ a buy-and-hold strategy for their more reliable stocks, commodities are usually continuously traded. In this sense, your commodity broker becomes even more important than your stockbroker –due to the constant activity involved with commodity trading, buying and selling.

Why do I need a commodity broker?

If you are looking to expand the range of your investments, commodities can be a lucrative addition to your traditional stocks and real estate. Generally, investors seek to put 5-10% of their total investments into commodities.

A commodity broker serves as the middle man in the buying and selling process. Since the broker works off commission, he/she seeks to get you the highest return for your trades. Your broker will know the most trustworthy traders and where to get you the highest returns on your commodities. Dealing commodities on your own can be a risky business. Although brokers take a percentage of your sales, you won’t be losing as much as you might by inadvertently dealing with dishonest buyers. For example, there are plenty of scammers offering cash for gold; a broker could easily steer you away from such trading misconduct.

An efficient broker will keep you regularly updated on the status of your commodities. Though commodity equities tend to have extreme up and downs, a good commodity broker will make sure your investments never fall below 30%.

What type of commodity broker advising is available?

Commodity brokers often offer two different options: discount and full service. Discount services come with lower commissions, but less broker assistance. Discount services are advisable for more seasoned commercial traders. Full service assistance entails a higher rate of commission and can range from mutual client-broker decision-making to full broker control of commodity trades.

By Lynn Jackson on behalf of Cash for Gold USA.

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