Commodity Trading Advisor or CTA

Commodity Trading Advisors or CTAs are persons or firms which profit by handling managed futures accounts from their clients’ behalf or by providing advice on trading. They must be registered with Commodity Futures Trading Commission; registration is done through NFA (National Futures Association). CTAs differ considerably with the markets they are trading, their trading style, trading strategies, experience levels and account specifications.

One clear classification of Commodity Trading Advisors is based on trading style.

1. Discretionary CTAs, who make trading decisions based on their trading abilities and fundamental and technical analyses.
2. Systematic CTAs, who use sophisticated trading systems to generate trading signals.

Different CTAs follow different trading strategies to profit from bullish, bearish and sidewise markets on both long-term and short-term basis. Some major strategies include trend following strategies, counter trend strategies, arbitrage strategies, fundamental trading strategies, option writing or selling etc. Many CTAs trade one or two futures markets like agricultural commodities or energy commodities, while others believe on diversification. The account minimum requirements also vary considerably.

Things to consider when choosing a Commodity Trading Advisor for managed futures trading include their trading experience, products traded, past performance and minimum account requirements.

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