It used to be only the uber-rich would play in commodities, other than farmers who would buy futures to actually hedge against changes in the markets that would affect their income negatively. But in more recent history, new "mini" contracts have sprouted up that are 1/2 to 1/10 the size of the regular contracts, allowing smaller players to get into the market. It is also easier to setup futures trading accounts nowadays. However, I've never run across anyone talking about trading futures, other than one older family friend years ago. You just don't hear Joe in the office talking about his soybean contracts doing well.
The commodity markets are hard to learn about and understand. There is not much good information out there and I think it takes a lot of experience to really get a feel for things. Even though there are trillions of dollars traded in futures each year, there aren't many little guys participating. It is risky. I remember reading stats on how most amateur futures traders end of losing most of their money, mainly due to not understanding and managing the risk involved.
Anyway, it is really interesting stuff and I'm going to try to get my feet wet. I was surprised that there aren't more online brokerages that offer futures trading accounts. In fact, I couldn't find one true Canadian one that looked trustworthy and mature. After much research, I finally settled on OptionsXpress.ca. They're still an American company which happens to have a small Canadian arm to allow us Canadians to get involved.
OptionsXpress really impressed me. They have an amazing website with tons of information on it. It makes you feel very welcome and comfortable. All of their information is easy to follow and understand, and they are completely open about everything. You really seem to know a lot about them after reading through the site (compared to some sites that don't have much info and thus seem more shady). They seem trustworthy, their trading platform seems solid and easy to use, they have tons of help and examples for every type of trading action available, all sorts of common questions are answered in their FAQs, and they have a Live Help feature -- it all really gives you peace of mind. I actually used their "Live Help" feature and chatted online with a person, who was very helpful and answered all my questions. I've started the process of setting up an account, and everything has been so smooth so far. They give you FedEx shipping labels for free overnight shipping of your application, and you get automated emails for each stage in the process (e.g. "We just received your application and are now processing it). I'm looking forward to using them. However, who knows, I may not even get approved -- it's a two step process: first creating a regular equity/options account, and then applying for futures trading.
It seems the most popular online broker is interactivebrokers.ca/.com. They have crazy low fees and apparently have the most powerful trading platform, but I've heard it's very complex to use because of this. They seem geared more towards experts than to first time traders, so I didn't feel comfortable going with them. All the other brokers I looked into just didn't seem as organized, informative, and trustworthy as OptionsXpress.
The first thing I want to trade, if I can get an account setup soon, is probably the most volatile commodity out there: Natural Gas. More in my next post...
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