Do you see yourself playing a role in bringing that morning cup of coffee to countless tables worldwide? Or in fuelling millions of rides to work or back home, to school, dinner, the theatre or the doctor? Navigating a dynamic global marketplace where diverse essential resources and raw materials, agricu... Continue Reading
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What are the typical responsibilities of a Commodity Trader?
A Commodity Trader would typically need to:
In addition to working out of offices, Commodity Traders spend long periods sitting or standing in trading rooms or at commodities exchanges in a fast-paced and often stressful environment.
You may need to travel to meet with clients. You will likely live and work in metropolitan areas, but you may also work with small and independent finance companies in smaller towns and cities.
Given the global nature of commodity trading, Commodity Traders must typically adapt to different time zones worldwide, which means their work hours can be long and irregular, often more than 40 hours a week. You will likely need to work early mornings and late nights and on weekends and holidays to make sure you can monitor markets regularly and execute trades promptly. Commodity Traders also spend time to stay updated with current global events, whether political happenings, economic trends or natural occurrences, as they strongly influence commodity prices.
Research suggests that flexible hours and generous telework policies appeal more than salary to the younger generation. There has been an incremental increase in employers willing to give promising employees a chance to adjust their schedules per the job demands.
Finding a new job might seem challenging. Commodity Traders can boost their job search by asking their network for referrals, contacting companies directly, using job search platforms, going to job fairs, leveraging social media, and inquiring at staffing agencies.d
Commodity Traders are generally employed by:
Professional associations and organisations, such as the Global Association of Risk Professionals (GARP), are crucial for Commodity Traders interested in pursuing professional development or connecting with like-minded professionals in their industry or occupation.
Professional associations provide their members with various continuing education and networking opportunities and mentorship services. Membership in one or more adds value to your resume while bolstering your credentials and qualifications.
While there are no particular requirements in terms of the experience aspiring Commodity Traders must possess, acquiring expertise in some areas may increase your chances of success in the global arena of commodity trading.
Even before you enter the real world of commodities markets, you may use online tools, such as stock simulators to learn and practise stock-picking, trading and investing skills and strategies in a risk-free environment. You may even enter simulation contests and pit your skills against real competitors but without using real money.
You may gain initial exposure to real-life commodities market operations and trading systems through internships or entry-level employment with commodity trading companies, financial institutions or commodity exchanges. Such roles may require you to assist senior traders and teach you to observe, understand and analyse market trends and apply appropriate trading and risk management strategies and techniques.
Experience in jobs that build your familiarity with using standard software applications and require you to practise your numeracy and analytical skills and communication and interpersonal abilities can also serve you well in your role as a Commodity Trader.
Participating on a trading floor or for a brokerage house can give you firsthand experience in client interaction, carrying out trades and understanding the dynamics of the commodities marketplace.
Working in research or analytical positions involving commodities allows you to conduct an in-depth analysis of trends, opportunities and risks in commodities markets.
It can be advantageous to have industry-specific expertise relating to commodities such as mining, agriculture, energy or manufacturing, which affords a firsthand understanding of the production and supply chain and demand dynamics of particular commodities.
You may also benefit from entrepreneurial experience, which help you build skills transferable to commodity trading, such as evaluating opportunities and risks, strategic decision-making, problem-solving and critical thinking.
Even while in high school, you can check with a teacher or counsellor about relevant work-based learning opportunities available in your school or community that can help you connect your school experiences with real-life work.
Join some groups, try some hobbies or volunteer with an organisation of interest, so you can have fun while learning about yourself and be directed toward a future career.
Read about the profession and interview or job shadow experts working in commodity trading to prove your commitment to course providers and prospective employers.
A bachelor's degree in a relevant academic discipline, such as finance, economics, accounting, commerce, actuarial science, business administration, agricultural sciences or related fields, is typically the minimum educational requirement for Commodity Traders to land entry-level jobs. A combination of relevant education, experience, skills and certification gives you a competitive advantage.
A degree in finance equips you with the skills and knowledge to monitor commodities markets, analyse commodity prices and their fluctuations, manage risk and make informed investment choices.
An economics degree helps you understand macroeconomic and microeconomic principles and how the market dynamics of supply and demand impact commodity prices, enabling you to base investment decisions on an analysis of economic trends.
Studying accounting, marketing and finance through a business administration degree equips aspiring Commodity Traders with a broad-based knowledge of business principles. Case studies foster your analytical, critical thinking and decision-making skills.
A degree in agricultural sciences or a similar discipline can be helpful for those aspiring to trade in agricultural commodities as you learn about the critical factors that determine commodity prices and volatility, including crop cycles, weather patterns and the fluctuations in supply and demand.
Computer proficiency is essential since trading is now largely automated.
You can advance in the field of commodity trading by pursuing a master’s degree, such as an MBA (Master of Business Administration).
Remember that completing a particular academic course does not guarantee entry into the profession. Be that as it may, professional qualifications and transferable skills may open up more than one door.
Do your homework and look into all available options for education and employment before enrolling in a specific programme. Reliable sources that help you make an educated decision include associations and employers in your field.
Take high school courses in economics, mathematics, business, accounting, geography, psychology, the sciences and languages. English and speech classes will help you develop your research, writing and oral communication skills.
Certification demonstrates a Commodity Trader’s competence in a skill set, typically through work experience, training, and passing an examination. Successful certification programmes protect the public's welfare by incorporating a code of ethics.
The Certified Management Accountant (CMA), an advanced credential offered by the Institute of Management Accountants (IMA), attests to your accounting and financial management abilities.
The Certified Financial Risk Manager (FRM), a rigorous certification offered by the Global Association of Risk Professionals (GARP), demonstrates your ability to stay current with and understand the rapidly evolving financial risk management concepts, strategies and tools. GARP also awards the globally recognised Energy Risk Professional (ERP) credential, which assesses a candidate’s risk management skills as applicable to a real-world energy context.
The Project Management Institute (PMI) grants the Project Management Professional (PMP) certification, demonstrating a candidate’s competence in managing diverse projects across industries to potential employers.
The Certified Financial Planner (CFP) designation, awarded by various professional organisations in several countries, signifies a professional’s skills in financial planning, including taxes, insurance, estate planning and retirement saving.
The Chartered Financial Analyst (CFA) certification, offered by the CFA Institute, is widely respected and demonstrates mastery in investment management and analysis. It requires candidates to hold a bachelor’s degree, possess at least four years of investment decision-making experience and clear all three levels of the CFA exams, which cover investment tools, asset valuation, portfolio management and wealth planning. The rigour of the exams demands considerable study time and an average of four years to complete.
Commodity Traders may also need to undergo an employment background check, including but not limited to a person’s work history, education, credit history, motor vehicle reports (MVRs), criminal record, medical history, use of social media, and drug screening.
Performance, experience, and the acquisition of professional qualifications drive career progression. Employees with consistently high levels of performance may be eligible for promotion every two to three years.
Aspiring Commodity Traders may begin their careers at entry-level jobs at commodity trading firms, financial institutions or commodity exchanges. Once they acquire familiarity with market operations and trading techniques, they may head to the roles of Junior or Assistant Traders, working closely with experienced traders and learning the nuances and complexities of commodities markets.
Building skills in market analysis, trade execution and risk management and a thorough grasp of particular commodities, market trends and trading strategies equips you to advance to a Trading Desk or an Execution Trader position. At this level, you can execute transactions, manage clients’ trading portfolios and watch market positions while learning to use trading software and implement strategies based on your market data analysis.
Rising to the position of Portfolio Manager or Senior Trader demands a track record of proven expertise and success, as it requires you to assume more significant responsibilities. You will take charge of more extensive trading portfolios, which you must manage profitably by identifying suitable trading opportunities and choosing appropriate investment and risk management strategies.
Senior Traders can advance to become Trading Team Leads or Head Traders, directing and supervising trading operations. They must coordinate work with other departments, and their work includes research, risk management and compliance.
Further progress entails stepping into management and leadership roles in the trading division or the larger enterprise. In such roles, you will manage your department and engage in strategic planning, business development and client relationship management. You may also mentor new hires and help cultivate a new crop of Commodity Traders.
The desire to accelerate career growth and personal development has an increasing number of millennials choosing to job hop and build a scattershot resume that showcases ambition, motivation, and the desire to learn a broad range of skills.
Studies prove that job hopping, earlier dismissed as “flaky” behaviour, can lead to greater job fulfilment. Employees searching for a positive culture and interesting work are willing to try out various roles and workplaces and learn valuable, transferable skills along the way.
Candidates with relevant education and certification, experience in market operations and on a trading floor, the necessary quantitative and analytical skills, up-to-date knowledge of market conditions and the factors that influence them, familiarity with the latest technology, and an awareness of compliance and regulatory requirements have the best job prospects.
Continuing professional development (CPD) will help an active Commodity Trader build personal skills and proficiency through work-based learning, a professional activity,
formal education, or self-directed learning.
You can stay current with constantly evolving commodities markets and changes in legislation by participating in relevant training programmes, attending conferences and webinars, and reading trade magazines regularly. Another way of growing professionally is to network with peers and seniors by joining relevant associations, sharing insights and keeping up with industry advancements. You may also find mentorship programs to guide and support you in your career path.
Developing expertise in quantitative analysis, statistical modelling, data interpretation and programming skills in Python or other specialised commodity trading software is beneficial. Market research and analysis are other critical skills that Commodity Traders must develop. You must be able to carry out supply and demand forecasting and thoroughly understand how geopolitical factors, macroeconomic indicators and industry-specific trends influence commodity trading and accordingly recommend and use strategies to ensure optimal investment choices.
Given the volatility of commodities markets, trading professionals must strengthen their risk management skills. You must focus on market risk analysis, credit risk assessment, hedging tactics, portfolio diversification and derivatives to efficiently manage trading risk exposure.
Take refresher courses or attend workshops to develop team leadership, project management and strategic decision-making skills essential to landing managerial positions or launching business ventures in the commodity trading sector.
Aim to acquire relevant certification or higher educational qualifications. In addition to offering the opportunity to continually upskill, regardless of one’s age, job, or level of knowledge, CPD also enables the periodic renewal of your certifications, which increase your chances of advancement and becoming an independent consultant.
What is a Commodity?
Raw materials, typically the natural resources producers and manufacturers use to create finished products, are called commodities. They are physical goods bought, sold and traded, unlike securities, such as stocks and bonds, which are financial contracts. Weather patterns, supply and demand, economic trends, currency exchange rates, geopolitical events, government policies & regulations, energy prices, speculation and investor sentiment may impact the prices of commodities.
The four primary categories of commodities are given below.
Energy: Materials used in energy production fall under this category and include oil, fossil fuels, electricity, water, solar power, fossil fuels, and other energy-based resources.
Metals: Base or industrial metals include iron ore, tin, copper, aluminium and zinc and are used by manufacturing industries. Precious metals, such as gold, silver, platinum and palladium, are typically used to fabricate jewellery.
Agriculture: Produce grown in agricultural settings falls under this category and includes edible items, such as grain, fruit, vegetables, coffee, cocoa and sugar, and nonedible ones, including cotton, palm oil and rubber.
Livestock: Live animals, including horses, chickens, sheep, cows, and other domesticated animals, are examples of livestock commodities.
What is Volatility?
Volatility describes the characteristic of a market or security’s price variance to undergo periods of unpredictable price movements, which can sometimes be sharp and either upward or downward. In short, it is the degree of an asset’s price variance over a specific period. Statistically, volatility is quantified by the standard deviation of a market or security’s annualised returns over a given period. It signifies the rate of price increase or decrease. The statistical measure of volatility helps define the parameters to assess the risk versus reward profile of assets. High volatility describes a situation wherein the price fluctuates rapidly and substantially over a short time, touching new highs and lows. In contrast, a slow movement with smaller fluctuations, higher or lower, or relative stability signifies low volatility.
Why are Commodities More Volatile Than Other Assets?
Commodity Traders and investors must understand and monitor the volatility of commodities since they tend to be highly volatile. Generally, commodities in the energies group display the highest volatility, while agricultural products show the least dramatic price swings. Some significant factors contributing to the high volatility of commodities are described below.
Nature: Natural occurrences, such as weather patterns and natural disasters, directly affect commodity prices worldwide, particularly since commodities are related to agriculture, energy and natural resources. For instance, droughts, floods, hurricanes or frost can cause extensive crop damage, reducing yields and supply and hiking prices of certain commodities, such as wheat, cotton, coffee, cocoa, sugar, corn and soybeans. Disease outbreaks among livestock are another example of how natural factors may cause greater volatility in commodities markets. The supply and prices of oil and gas or metals and mining commodities can be impacted when natural disasters occur in areas of production. However, the impact of natural factors on commodities markets occurs in conjunction with other market factors, such as supply and demand dynamics, global economic trends and geopolitical events.
Supply & Demand: Commodity production tends to be geographically concentrated within specific regions. For instance, crop cultivation depends on soil and weather conditions in a certain area and metal extraction or oil drilling on reserves in the earth’s crust. However, the demand for these commodities is universal. Consequently, the supply and demand dynamics generated by localised production and global demand for raw materials contribute to their high volatility. Global economic trends, geopolitical events, technological advancements, and weather conditions also influence supply and demand.
Commodities futures: The most popular method of trading commodities is through a futures exchange. A futures contract entails an agreement to buy or sell a commodity based on its predicted and predetermined trading price at a specified date in the future. A futures contract buyer is obliged to purchase and receive the underlying commodity on the expiration of the futures contract. The seller of the futures contract assumes the obligation to provide and deliver the underlying commodity when the contract expires. Commercial or institutional users of the commodities and speculative investors use futures contracts for any commodities category. When futures are in a state of contango, their future prices are higher than current ones. When futures are in a state of backwardation, commodity prices for a commodity are higher now than at a future date.
Potential Pros & Cons of Freelancing vs Full-Time Employment
Freelancing Commodity Traders have more flexible work schedules and locations. They fully own the business and can select their projects and clients. However, they experience inconsistent work and cash flow, which means more responsibility, effort and risk.
On the other hand, full-time Commodity Traders have company-sponsored health benefits, insurance, and retirement plans. They have job security with a fixed, reliable source of income and guidance from their bosses. Yet, they may experience boredom due to a lack of flexibility, ownership, and variety.
When deciding between freelancing or being a full-time employee, consider the pros and cons to see what works best for you.
Commodity Traders must have a comprehensive and evolving understanding of the commodities they trade to tackle complex, dynamic and fast-paced markets successfully. Optimal investment decisions require staying current with the diverse global influences on markets, such as supply and demand, pricing systems, weather patterns, economic trends and geopolitical occurrences. After all, it takes numerous commodity transactions before the one at the grocery store’s cash counter to get that sweet bar of chocolate into our shopping bags.
Observe closely and understand the market cycle and the factors that influence it. Accurate observations can lead to greater profits. Expect volatility at all times and understand it well to benefit from it. Remember that analysts and algorithm-based predictions may not always give you accurate commodities forecasts, and you must do your own thorough research.
Green or low-carbon technologies and the switch to renewable energy worldwide are expected to raise the demand for metals, such as aluminium, copper, lithium, silver, steel and zinc.
What do Commodity Traders do?
A Commodity Trader would typically need to:
Accredited
$50,230
