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11 Oct, 2018

Commodity Trading Through Discount Brokers

Commodity Trading Through Discount Brokers


Discount commodity brokers came into existence as the technological developments and the Internet made all kinds of financial trading, including commodities, possible for millions of people around the world. Previously, commodity trading was limited to high net worth people or those that had the time and convenience to work with stock brokers.


Today, it is not necessary to engage with the stockbrokers over a telephone and keep up to date by going through newspapers and specialized magazines. It is possible to do most of the things online. Expert advice from experienced stockbrokers comes at a cost and hence may not be available online. But then, the need for expert advice may not arise because of the wealth of information and specialized training opportunitiesavailable online.     


Most of the online traders who open accounts with brokerage firms choose not to opt for expensive expert advice or personal attention. In the past, expert advice was part and parcel of standard services offered by brokers. This led to the reduction of brokerage costs and development of the stripped down version of the traditional brokerage accounts.


The brokers that offer services at reduced costs are known by the name ‘discount commodity brokers’. Most of the brokers provide both regular and discounted services. Both the services are essentially the same, but the latter option neither offers individual attention nor expert advice that customers may often expect. This means that traders opting for discounted service will have to trade with the help of the facilities such as trading platform, charts, etc., that the broker provides when they open an account with them. They cannot call the broker for any kind of advice on trades.


The advantage of trading with discount commodity brokers is that they are cheaper. A majority of the new traders who use the online platforms for financial trading do not have the resources to trade in any other manner. They are better off without the advice and they believe that they can get the same at a cheaper price or for free elsewhere online.


It is the technological developments in the fields of Internet and computers that have made discounted services possible. Automation of the web-based applications has helped to reduce the number of staff members required to be employed. This, in turn, has drastically reduced the operating costs of the brokerage.  


In fact, the commodity brokers have started offering deeper discounts, taking the business model to a whole new level. All that the brokers do is accept orders from clients and execute them through their online platform. Further, they also exclude customer advice and service. However, the traders get access to all the services required to place orders at any time. Therefore, deep discount accounts are popular among online traders.


Another benefit of working with such commodity brokers is that clients can start trading by making lower initial deposits of just $2,500, much lower compared to the deposit to be made when opening a traditional type of account. This is another reason why discount commodity brokers are popular among online retail traders.