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Table of Contents

How Much Money Do Commodity Brokers Make?

Young commodity broker talking on the phone in front of screens showing analysis information
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Compensation for commodity brokers is often on a commission basis. They receive a percentage of the gross commissions from the trades placed by their customers. Commissions are fees for the execution of buying and selling orders.

Some commodity brokers are highly successful. Many fail in the first six months. You could be misled if you look at industry averages to come up with an accurate estimate of what most commodity brokers earn.

Key Takeaways

  • Online trading has decreased broker commissions for commodity traders.
  • Even a mediocre trader can earn up to $87,000 per year with enough business.
  • Top tier traders have both excellent sales and trading skills.
  • These traders can earn six- or seven-figure incomes each year.


Commissions

Commission rates have decreased a great deal since the late 1990s with the advent of online trading. This has had an impact on the earnings for commodity brokers. But there are still many brokers who make a very good living. Many people desire to pursue a career in this field.

Many brokers who are starting in the business struggle to earn enough to pay their living expenses. Starting out means building a book of business. This can take time. Some can survive the initial economic pain of low earnings, but others become frustrated. They leave the business.

Building a business first requires an education in commodities futures. You'll then need a sales effort to attract customers.

Brokers who have gotten over the hump of starting a business and have built a decent book of business can make a better-than-average living. These brokers can survive even if they lack excellent sales skills or are mediocre traders. These types of brokers tend to earn between $30,000 and $70,000 a year. ZipRecruiter puts the average at $87,737 as of early 2022.

Experience

The top tier of commodity brokers often has one of two skills. They're either great salespersons or they're very good traders. A broker who is a top salesperson or marketer attracts new business, even if they're not a great trader.

A small percentage of brokers possess both skills. These brokers also tend to attract larger accounts. This translates to a high flow of trades and commissions. These professionals at the top tier of brokers can earn a six- or seven-figure income per year.

The cream of the crop tend to have clients like hedge funds that transact large volumes of futures business on a daily basis.

Changes in the Business

The business of commodity brokerage has changed dramatically with the advent of electronic trading. Electronic platforms do the job formerly done by commodity brokers with a higher degree of speed and efficiency and at a much lower price.

Many commodity futures brokers have become electronic traders. Others have moved into other fields within the commodity futures business. Some have become CTAs, CPOs, IBs, or money managers. Others have concentrated on clearing or other services for larger traders or fund managers.

The days of the old pit-trading commodity brokers have come to an end. But those brokers with strong market skills are still in demand. They can provide valuable advice and analysis for clients who compensate them by transacting through the broker.

Keys to Success

It's still possible to make money in the commodity business as a broker, in some cases by raising money for fund managers. There's still a thriving business for physical brokers who arrange transactions between producers and consumers around the world. These people tend to be experts in a certain commodity. They use their vast network of contacts and knowledge to profit from arranging physical transactions around the world.

The commodity business has transitioned over the past years. But there are always options for knowledgeable professionals who understand the markets and have contacts. Those starting out in the business would do well to apprentice under a seasoned mentor who is a commodity broker, or a professional involved in some aspect of the business. Hard work and competency often result in rewards, just as in any field.

There are many online study courses for the Series 3 exam that will familiarize you with the ins and outs of the business if you want to be successful in this field. But the best way to learn this exciting and fast-paced business is to apprentice under an experienced professional who already has years of experience.

Commodity brokerage can be a lucrative business. But the rewards tend to flow to the most knowledgeable brokers with a track record of success. A successful and well compensated commodity broker often gets new customers by recommendations from current contracts who profit from their experience.

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