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It is easy enough to become a commodity broker. but simply passing the Series 3 exam and being a licensed broker does not guarantee you the riches you dream of.

The fact is that many new commodity brokers struggle to make a living. Most new brokers work on a commission basis and some receive a token salary just to pay the basic bills. Getting through the first six months can be painful, but it will take some hard work and talent to make a career as a commodity broker.

Most commodity brokerage offices are setup where a broker opens accounts and earns a percentage of the commissions generated from those accounts. Some of those accounts might trade online and don’t need any assistance. Others will be full service where the broker makes trade recommendations to his clients.

Most brokers who have full service accounts are working on straight commissions. So, the more trades they do for their clients, the more money they make. Obviously, these accounts need to be opened in order for the broker to have any accounts to trade and generate commissions. This is the first major hurdle that commodity brokers face – obtaining clients.

It is not easy to open commodity accounts. You have to be a good salesman and be somewhat knowledgeable on the commodity markets and trading. You will also spend a large part of your day talking with potential clients, doing marketing and researching the markets. You almost run into a Catch-22 situation. If you spend too much time trying to open accounts, you have little time to trade. If you spend all day trading, you have little time to open accounts. The key is to manage both of these functions well.

If you cannot open accounts in your first few months, being a commodity broker will not be easy. You have to open a decent amount of accounts and raise equity in order to generate commissions. No accounts equals no money. That is a stressful situation. Some brokers work in teams where one broker will open accounts and the other will trade the accounts. That is a good way of utilizing you best skills.

Opening accounts is the first major hurdle, while trading the accounts successfully is the second major hurdle. You are fighting an uphill battle if you open accounts only to lose them in a couple months. If your trade recommendations are so bad that your clients continuously lose money, you will basically be caught in a cycle where one new account simply replaces a lost account. It is tough to get ahead in this situation.

I often recommend to brokers that they take a long term and conservative approach with their clients. This means having a trading plan for your clients. Use a trading system or methodology that produces more consistent returns and less volatility in client equity. You want to make sure you don’t risk all their money on one trade. Don’t be afraid to take losses. Many brokers typically watch a loss turn into a bigger loss and hope for the market to turn around. This is a natural tendency, because they don’t want to call a client and tell them its time to take a loss.

Commodity brokers have to find a happy medium between trying to make profits for their clients and generating commissions. If your goal is to make money for your clients, the commission part normally works itself out. Granted, you can’t do one trade a year that makes your client 20 percent and you only get $50 — and expect to have a successful career as a commodity broker. Clients realize you need to make a living too, and if you treat them right, they don’t mind paying reasonable commissions.