What is a Futures Broker?
A futures broker is a trader that specializes in dealing with commodities futures contracts.
What are Futures?
Image source: Pixabay
Futures are essentially contracts that consist of an agreement to sell a commodity or stock at a set price, but after a predetermined amount of time has passed.
As the value of the actual product rises or falls, the value of the contract changes as well.
Required Professional Expertise
A skilled futures broker needs to have a very good understanding of market trends in order to be successful.
They have to be able to predict if the price on a given commodity will rise or fall, as this allows them to know how and when to buy or sell futures contracts.
A futures broker deals in a market that is somewhat riskier than traditional stock investing.
This is because commodity values are subject to some very unpredictable risks.
For example, a fire in a major oil refinery can vastly affect the price of oil.
Similarly, a drought can affect food crop values astronomically.
These types of factors are not predictable, and present a significant risk as a result.
A futures broker works for investor clients in order to try and make them money by investing in the futures market.
Usually, futures investing is the realm of high-net worth clients, as the risk involved necessitates the use of a skilled and knowledgable brokerage.
AdvisoryHQ (AHQ) Disclaimer:
Reasonable efforts have been made by AdvisoryHQ to present accurate information, however all info is presented without warranty. Review AdvisoryHQ’s Terms for details. Also review each firm’s site for the most updated data, rates and info.
Note: Firms and products, including the one(s) reviewed above, may be AdvisoryHQ's affiliates. Click to view AdvisoryHQ's advertiser disclosures.