Compensation for commodity brokers is generally on a commission basis. Commissions are the fees that associate with the execution of buying and selling orders. It means that they receive a percentage of the gross commissions from the trades placed by their customers.
While some commodity brokers are highly successful and many brokers fail in the first six months, it is misleading to look at industry averages to come up with an accurate estimate of what a typical commodity broker earns.
Commodity brokers make money by three things, namely commissions, experience, changes in the business, and keys to success.
Commissions
Many new brokers starting in the business struggle to earn enough to pay their living expenses. Starting out means building a book of business, and this can take time. Building a business first requires an education in the commodities futures business, and then a sales effort to attract customers.
Brokers who have got over the hump of starting a business and have built a reasonable book of business can make a better than average living.
Even though these brokers lack excellent sales skills or are mediocre traders, they often can survive in the business. These types of brokers tend to earn between $30,000 and $70,000 each year.
Experience
A commodity broker who is a top salesperson or marketer attracts new business, even if they are not necessarily a great trader. There is a small percentage of commodity brokers who possess both skills.
These brokers also tend to attract larger accounts. It translates to a high flow of trades and commissions. These professionals who are the top tier of brokers can earn a six or seven-figure income each year.
Change in the Business
Commodity brokerage in business has changed due to the advent of electronic trading. Nowadays, electronic platforms do the job formerly. Commodity brokers do a higher degree of speed and efficiency and at a much lower price.
Many commodity futures brokers have become electronic traders. Meanwhile, others have moved into other fields within the commodity future business.
However, those brokers with strong market skills are still in demand. The reason is that they can provide valuable advice and analysis for clients who compensate them. Then, the transaction is done through the broker.
Keys to Success
If you wish to become a successful commodity broker, there are many online study courses for the series three exams that will familiarize you with the ins and outs of the business.
A successful and well-compensated commodity broker often gets new customers by recommendations from current contracts who profit from their experience.