Self-Directed Commodity Accounts - dummies

By Amine Bouchentouf

After you select a commodity brokerage firm you’re comfortable with, it’s time to open an account and start trading! You can choose from a number of different brokerage accounts. Most firms will offer you at least two types of accounts, depending on the level of control you want to exercise over the account.

If you feel confident about your trading abilities, a self-directed account, in which you call the shots, is the most suitable account for you. On the other hand, if you prefer to have a professional make the trading decisions for you, a managed account is your best bet.

If you feel comfortable with exchange-traded products and are ready to take direct control of your account, consider opening a self-directed account, also known as a nondiscretionary individual account. With this account, you take matters into your own hands and make all the trading decisions. If you have a good understanding of market fundamentals and want to get direct access to commodity exchange products, a self-directed account is for you.

Before you open a self-directed account, talk to a few commodity brokers. Each firm offers different account features. This is similar to buying a car — you want to test-drive as many cars as possible to get the biggest bang for your buck.

Specifically, ask about any minimum capital requirements the firm has. Some commodity brokers require that you invest a minimum amount of $10,000 or more. You also want to become familiar with account maintenance fees and the commission scale the firm uses.

Knowing this information up front can save you a lot of heartache down the road. After you gather all the relevant information and open your account, you’re finally ready to start trading and placing orders!