Selecting a Broker

When selecting a commodity broker, remember that you will develop a long-term relationship. Your broker will work for you, so you must conduct the interview carefully if you are to form a close working relationship. You may need to contact several brokers before you find one who is right for you. Strive for a high comfort level.

It's important that you feel comfortable and trust your broker. You should be comfortable with your broker's personality, experience, knowledge, services and commission structure.

Questions to Ask When Interviewing a Futures Broker:

Does the broker have a working knowledge of the fundamentals and technicals of the commodities you wish to trade?

What services does the broker offer and what are the commission fees?

Ask the broker about commission charges. As with most businesses, there is usually a volume discount in the brokerage business, and commission varies with the amount of service. Also, make sure you understand all additional fees for value-added services.

What is his/her track record like?

Find out if the broker has been in business for a long time. Is the broker willing to keep abreast of new trading techniques and strategies? Is the broker responsive to clients' trading ideas? If the broker handles many clients, is there time for personal attention? Are most of the broker's clients commercial hedgers, speculators or a mix of both? Most of these questions will be answered if you check his/her references.

How are issues handled?

Find out the brokerage firm's policies and procedures regarding trading issues. Who should you contact regarding questions about your account statement or disputed orders?

After you've had the opportunity to visit with several brokers, evaluate each one on based on the criteria that is most important to you. Take this time to contact the National Futures Association (312) 781-1300 and find out if there are any disciplinary actions against a broker you are considering. If there are, ask the broker to explain the circumstances before dismissing them from your list. Keep in mind that no matter how technically competent a broker appears, or how many services he or she may offer, you are unlikely to have a satisfactory working relationship unless you feel comfortable with that person.