Abstract
The first question I need to ask myself is who I am and why I am being called a Commodity Trading Advisor (CTA) and not just a general businessman? A CTA is a person who oversees and manages one or various accounts for each of his clients for compensation or profit. His duties are mainly to advise his clients either directly or indirectly using the already established media including publications, electronic media or any other means communication mode available to him including the internet. There are different dealings where a CTA can be involved and this include commodity, currency futures, interest rate futures, stock index futures, stock future etc.
I am writing this paper as a CTA dealing with commodity future which includes most agricultural products such as cotton, sugar, coffee, corn, copper, oil, wheat, pork bellies. Any CTA must be registered not unless he provides advice for less than 15 people during the last 12 months period, or gives advice solely to a registered commodity pool or is in one of the businesses already registered with Commodity Exchange Act. Other exceptions for registering are when the CTA is registered in another capacity and he advices only on that capacity, is recognized as a registered investment adviser with the Federal Securities Law.
If a CTA is not sure of any of these provisions for exception of registration the best thing for him is to consult an attorney so as to be safe from severity of non-compliance with the law. It is important to note here that though CTAs who operate under Commodity Pool Operators (CPO) are not required to register they must be keen to prepare and distribute disclosure documents, keep specified records about all participants and transactions both as individuals and also for the CPO, prepare and distribute audited annual financial reports.
Introduction
Having understood above as I must express my intention to consult an attorney to seek for any help that I need to do to be in the right side of the government. Besides that, I have characteristics that I think are key for any CTA to have in order to be successful. First I am a good in forecasting and valuing commodities futures. I have as a matter of fact a good record of steering clients towards not only profitable but also stable high-yield investments. This I have done my analyzing today’s stocks that has enabled me to accurately predict prices based on supply and demand rule.
Main body
The reason why I have analyzing skills is because I have spent years studying buying trend of many commodities especially those that supplement each other since I understand that the rise and fall of one can affect the market of the other product. I have also been able to analyze production and consumption trends considering both their histories and current performance, this has again made my predictions be very accurate. Since commodities markets are affected by many factors including weather and climate change, I have also endeavored to keep myself informed of change in weather patterns that could affect commodity futures that i am concerned with together with those that are correlated.
Just to give an example of how I deal with a real life situation, by observing the supply and demand law I know that in the past when the weather was not favorable, there is an reduction in supply which leads to a rise in demand and consequent high price. I can therefore use this knowledge to advise my clients to buy stocks when supply is high then wait to sell when demand is high. This way they will have bought commodities at lower prices and sold when the prices are high and therefore make a profit (Colin 2007).
Again as a Commodity Trading Advisor I know that the market is very volatile and therefore due to the uncertainty in global market I understand that I need to frequently assess the current market data. This will help me different factors that will affect my clients’ trading.
For example, I know that when financial markets tumble agricultural commodities that I am involved in will definitely be affected. This is because there is likely to high levels of employment and as a result lowering of purchasing power. When this happens there will be a reduction in demand and a subsequent fail in pricing. With this kind of information I will be able to advice my clients to invest in frequent consumable products e.g. wheat instead of cotton because these commodities will always be in demand and therefore transacting in them will be profitable (Thomas 1994)
Since my clients will depend on my advice regarding their transactions, I understand that I need to source information from dependable sources so as to avoid gross business mistakes. The USA department of Agriculture, Depart of Energy and Future Exchanges, Labor Department and USA Department of Commerce among many others will be my frequent source of information. This is because their information is not only accurate but also updated and widespread.
It is from them that I will get data about unemployment, crude oil prices, expected economic downturns that will affect my clients’ businesses. At the same time I need to know not only happenings in my country but also in foreign countries since they affect each others performance. I for example need to know which countries production will be affected by weather and advise my clients accordingly. For example if I got to know that a certain crop for example tea will be affected by seasons in a particular country, my next move would be to check whether there is a supplement available say coffee and if not then it will be accurate for me to advise my clients to supply both the tea and coffee since they will be both in demand and so will be pricey which is good for profit making. (Colin 2007).
Different times bring difference in performance in all markets. However, it is important to note that not all CTAs perform badly simply because the business environment is not conducive. As a astute CTA I endeavor to spare no expense when it comes to research. An intensive and running research not only in my area of concern but wider area will provide me diverse information across different markets and from there I will be able to pick any slight change in a particular market that will enable me make wise decision for my clients.
It is through this kind of research that I will get to discover other markets opportunity that my clients can diversify and benefit from as they run their mainstream businesses. As a matter of fact I have advised clients to change from a traditional business that is now crowded and join an upcoming business and they have succeeded and stayed in business that those I advised and thought otherwise (Gregoriou 2004).
Conclusion
Due to its long-term nature, commodity trading enjoys a combination of both traditional and current mode of transacting and if handled well, it is a profitable business no matter the market conditions. In this paper I have covered the legal matters that a CTA need to deal with before practicing so that to avoid serious implications that can harm not only a CTA’s reputation but also affect his clients’ businesses. I have also in depth covered my marketing strategies which include methods of gathering important information and being able to pass it down to my clients who if they take my advice are likely to be very successful in business.
I have discussed my sources of information and given the reasons why I chose them, I have also shown the importance of researching which as mentioned above can save client’s business, redirect his business or widen his scope of view as far as commodity trading is concerned. Despite having all the above quality and experiences that I have mentioned above I believe that communication is key in passing of information and persuading which CTAs are often required to do.
I would therefore want to add that my communications skills are very good, I go straight to the point when need be and I can delay information according to consumer moods especially when they are in a bad mood. I have also learnt to assess the timings which I disperse my information so as to protect spread of useful information to competitors and at the same time ensure that my clients get information in good time to make important decisions.
Work Cited Page
Colin A. (2007) “Futures and Options Markets” Waveland Press INC.
Gregoriou, Greg (2004) Commodity Trading Advisors John Wiley & Sons Ltd.
Thomas A. (1994) Winning with Managed Futures How to Select a Top Performing Commodity Trading Advisor.
Jake B (1997) Seasonal Trader’s Bible the Best of the Best in Seasonal Trades.
John P. and Sol Waksman (1993) Managed Futures Portfolio Strategies.
Peiperl, M., Arthur, M. and Anand, N. (2002) Career Creativity: Explorations in the Remaking of Work, Oxford, Oxford University Press.