What is a Commodity Trading Advisor?

Malcolm Tatum

Commodity trading advisors are licensed financial professionals who assist investors in the buying and selling of commodities. More specifically, the commodity trading advisor often functions as a money manager within the context of the futures market. Depending in the working arrangement between the investor and the commodity trading advisor, futures trading may be conducted on behalf of the client at the discretion of the advisor, of as a result of interaction between the investor and the advisor.

Commodity trading advisors assist investors in the buying and selling of commodities.
Commodity trading advisors assist investors in the buying and selling of commodities.

The commodity trading advisor is well versed in how commodity trading works. Along with understanding the structure and operation of commodity markets, the advisor will also have a solid understanding of the underlying commodities themselves. This means the effective commodity trading advisor will understand the current status of worth associated with the metals, grains, and foodstuffs that are commonly traded as commodities.

The advisor will also be able to competently project the upward or downward movement of a given commodity over time. By making accurate projections on the future performance of the commodity, it is possible to advise the investor as to which futures deals would be best. This may include knowing when it would be a good idea to either sell or hold off a futures purchase for a period of time, until the current trend runs its course. Accurate projections is an ability that helps the commodity trading advisor to enter into futures trading that will ultimately be in the best interests of the client.

Generally, a commodity trading advisor is trained and licensed to engage in the trading of physical commodities and in financial futures. This can include both bond and index futures. Along with individual investors, a commodity trading advisor may also work with partnerships or pools of investors to identify and engage in futures trading that will benefit a larger group of investors. As with an individual client, the commodity trading advisor may be granted broad discretionary powers over the available assets in the pool, or work closely with the members of the pool or partnership to execute futures trading.

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