Discount commodity brokers are often the same people as regular commodity brokers. It’s just that they offer a discounted service, often alongside their regular service. They’ve come into their own since the internet brought the trading of commodities, within the reach of potentially millions of people. Before then commodity trading tended to be only available to the more wealthy sections of society, or those with the time and disposition to engage with stock brokers.
Now, you can do everything online, and you don’t have to keep up to date through magazines and newspapers, themselves often out of date in financial trading matters before they reach you. And you have up to the minute (or almost) information online 24 hours a day (especially if you subscribe to a financial trading information service such as Sharescope), so you don’t need all the services that commodity brokers have traditionally provided.
In fact most online traders with a brokerage account decide they can do without this completely. There has thus come about a discounted service, or stripped down version of what had been the traditional brokerage account.
The discounted service is basically the same as the regular service, but without the individual attention and advice you would normally get. So if you opt for a discount service you will be able to trade using the broker’s site and facilities, such as charts, trading platform, and so on, but won’t be able to call on the broker for advice on a proposed trade, nor will the broker be pro-active in suggesting trades, as often happens with a standard account.
The advantage to traders of a discount service is, of course, that it’s cheaper. The majority of newcomers to financial trading via the internet wouldn’t have the money or resources to trade in any other way, and so they are happy not to have the advice, which they believe they can obtain free or cheaper elsewhere online, and to pay a lower set of fees.
And it’s because of the internet and advances in computer technology that brokers are able to offer these discounted services at low prices. The automation that web-based applications enable free up staff and reduce the running costs of a brokerage. So, as they say, it’s “win-win”.
Deep discount commodity brokers have taken this business model even further by offering an even cheaper type of account in which all they do is accept and execute orders. There’s no advice or customer service to speak of, and only a basic web-based trading platform. But there is still everything a trader needs to simply make one trade at a time, so it is a very popular type of account.
Another advantage of a discount commodity broker is that he will usually accept a lower initial deposit in order to open an account. This can often be as low as $2,500 – substantially lower than the amount required to open a traditional account. This has in turn helped to increase the popularity of this type of account and discount stock trading in general.
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Philip Gegan
