Those who dream of becoming investors can regularly find questions revolving around their minds. Growing Investors also ask themselves the same questions as they think of expanding on their investment or moving to a different field of investment.
Questions to ask a commodity trader are the questions that determine the kind of investment, risks to be taken, challenges encountered, costs to be incurred, time taken to accomplish a certain task, efforts required, and profit margins among others that we are yet to look at.
These questions are very important for somebody who plans to venture into any commodity trading activity, be it mining, agriculture, currency, energy, metals among other activities. For one to obtain clear information about the activity, consulting an expert is a basic and vital move.
Some people may offer misleading information that they are not sure of and may risk the capital of the investor and harm the entire market activities.
Commodity trading advisors are the right people to consult when it comes to deciding to invest in a certain commodity. Commodity trading advisors are heading managed future programs that involve a pool of investors who target better and controllable measures to maximize profit and proper utilization of investor’s capital. These advisors must be registered under Commodity Futures Trading Commission and all are required to have passed series 3 exams.
The benefits that an investor may earn is getting a well-experienced advisor that can help in propelling the future growth of the business activities. Personal advisors always try to understand the individual activity and every operation affecting its growth. An individual investor should deal with the advisors in person to get a deeper feel for the business operations since most advisors are people who have dealt with commodity trade operations for a long time.
Asking for these questions require a composed inquisitive language that can make the advisor or senior trader deliver detailed information about the activity in question. Some of the general questions may lead to obvious answer such as YES or NO, which eventually translates to the answers that you already have them.
Let us see 2 scenarios.
Scenario 1 – Questions to ask a commodity trader when you want to invest your money
- Is the current market state favorable?
- What’s the current state of the commodities market?
- What is the minimum investment requirement?
- Is the commodity price stable? And what determines its stability?
- Which technology can I deploy to improve productivity?
- What will likely determine how commodities prices track?
- How can commodities be used in a portfolio and what can they provide?
1) Is the current market state favorable?
The question to ask is about the market cycle. Market observers and advisors are aware of peak seasons and the market circle. They can tell the low seasons to buy commodities in a certain region, and the supper cycle period to maximize profit. For agricultural commodities, market observers always analyze the climatic conditions of different regions. These will help them tell the peak period for selling a given variety of a commodity and also the right time for stocking them to the next season. They are also certain about future changes in the price of a commodity. If there will be a minimal price increase, the advisor may opt to prefer selling the commodity at the current price so that the investor may venture into another activity as soon as possible.
What is the minimum investment requirement?
The investor needs to inquire much information on the actual amount of investment to be put in place for the activity in question. The question should also illustrate the current ability and the budged that the activity can operate following the current portfolio.
Where commodities fit in our lives?
The question will help in getting information about the necessity of the commodity and the perspective of the consumers. The activity involved should be one that provides a regular service or fills a certain gap of a need within the society. The commodities to be involved must be used as a routine, for example in the energy sector, we require fuel daily to keep our vehicles moving and keep our industrial machinery working, we eat daily and we require cooking oil, wheat or maize flour, beans, coffee among other commodities to sustain us and we require so many things to keep our daily life moving. These are factors that are considered as one of these main questions.
Is the commodity price stable? And what determines its stability?
The prices of different commodities depending on the country’s economic stability. Inflation and deflation may majorly affect the trading of a certain commodity. These factors majorly affect the currency exchange rate and cause more effect on those who trade on currencies. The fall in the selling price of a certain currency may cause unexpected loss to traders who bought the currency at a higher price, but it can be high time for those who are buying it currently. The instability of the market of these commodities may lead to unpredictable trading of the commodities.
Which technology can I deploy to improve productivity?
Following the advancement in technology, nearly every sector depends much on technology in the production and marketing networks of different commodities. You should ask about the kind of technology that the advisor has tried to deploy and reflected a positive profit margin.
Can you inform me about the activity track records?
Make sure that you inquire about any possible losses, low and high trading seasons and how fast can you recover from the loss, and in which way, this is crucial details that can help you make a proper investment decision by proper comparison with other activities.
You can also ask about the set goals, and how often can these goals are attained by different investors, and the information about the challenging factor that may fail in achieving these goals.
Having confidence and dream of future investment, we must consider getting proper advice as a key. We may incur an unrecoverable loss when we just get into activities without researching and getting a handful of information about the management and its productivity. Asking a question to advisors is a key factor since they are always there for our service. The questions that pertain our financial circumstances are also vital since it helps the advisors know more about our ability, and relate to the similar scenario that they have encountered within their fields of operation. We should also let them understand that there are some other questions we should have asked in our capacity, but we, unfortunately, missed to ask them. This will also convince the advisor about our need to know more about commodity trading activities.
You work hard for your money. Yes, it is true that money that is lost can be gained again. But, a person that is smart with their money puts their money to work for them by making smart investments. Working with a professional money manager or a commodity trading adviser can help you to make the best money managing decisions. But not all trading advisers or money managers are created equal and you do not want to be lead astray to risky investments with your hard-earned cash. I have put together a list of twelve questions that you should know the answers to before meeting with a trading advisory or money manager.
Scenario 2 – Interview questions – when you want to find a job as a commodity trader
Of course after the first question “why do you want to work in commodities trading” next can be:
1.) What are your goals or objectives as an individual investor?
As an investor, it is your responsibility to have an outline of what your goals are. You should know what you hope to achieve from investing and a plan in place to get there.
2.) Do you have a reliable way of selecting a commodity trading adviser? In order to choose one that is reputable and trustworthy, you’ll need a method whether based on the length of their track record or how their performance was indifferent marketing situations or maybe what their methods are to maximize profits and minimize loss. Do they have the ability to adapt to unforeseen events?
3.) How does your method of selecting a commodity trading adviser give you a leg up?
4.) How much risk capital are you willing to stake and how much are you willing to lose? You’ll need to know exactly how much you are willing to risk with anyone commodity trading adviser. As an investor, you need to know exactly where you plan on drawing the line.
5.) How much money do you need to produce each year from these investments? You need to know if you need to produce enough off of your investments alone to live off of.
6.) Are your goals and objectives as in individual investors something that is realistic and actually attainable or are you basing your goals on the off chance of you getting lucky? You need to how risky you plan on being with your investments,
7.) As a trader what are your expectations on the commodity trading adviser’s end? For instance, if you found a commodity trading adviser that has a system that is right 50% of the time and on individual trades, the profits are twice as much as the losses, it is still possible that they could lose 10 trades in a row. Are you willing to ride that losing trade out? How did the commodity trading adviser exit the losing trade and did they use stops? What is the maximum loss they accept per position?
8.) Do you want a commodity trading adviser that trades long term or short term? Or possibly even both?
9.) Are you the sole decision-maker when it comes to your investments or do you have a partner or commodity trading adviser expert involved?
10.) What percentage of your trading capital do you expect to make a year and what amount of risk are you willing to take to get there?
11.)What is the greatest peak to trough decrease you can stand?
12.) How will you be sure your method of selecting a commodity trading adviser is working? Do you know how they perform in different types of marketing such as trending, consolidating, or high volatility?