How to Choose a Commodity Trading Advisor (CTA)

Choosing a Commodity Trading Advisor (CTA) to manage your funds is one of the most important decisions you will make. Several factors come into play when matching a CTA with your investment objectives.

1. Minimum Account Size

The minimum investment on your part that different CTAs require, must be taken into consideration when determining which CTA best suits your needs.

Most CTAs carry minimum requirements of $50,000 to $100,000.

It is common for CTAs to have different account minimums. Each CTA has a unique trading style. That style dictates the margin requirement needed to participate in their program. Some CTAs trade several markets, requiring larger margin deposits, while others may only trade one market, requiring less of a margin deposit.

Larger minimum account sizes do not imply that the CTA will perform any better or worse than an account with a smaller minimum account size. It is the trading style of the CTA that determines the CTA's minimum account size.

2. Disclosure Documents

When considering a Managed Futures Account, all investors should completely review the CTA's Disclosure Document. This is of paramount importance.

You should review the Disclosure Document to see if that particular CTA's trading philosophy is compatible with your investment goals. Each CTA has a different philosophy and trading method. One CTA may offer a Day-Trading Program. Another CTA may offer an Option Selling Program. Another might offer a Position Trading Program. Study each carefully. Determine if the trading characteristics of that CTA's trading program matches your risk profile. The risk of loss trading comomodities is substantial. Please consider the risks before making a decision to participate in a managed account program.

3. Track Record

Pay particular attention to the CTA's track record. Review each CTA's historical trading performance.

Although the trading program's return must look attractive to you before you decide to invest, given the risk you are about to take on, you should consider that past performance is no guarantee of future results. Draw-downs can and will occur in every trading program. Please allow for drawdowns when considering whether CTA programs are right for you.

The amount of funds the CTA currently has under management and the number of accounts closed out should also be reviewed. Typically, as an advisor becomes more successful the funds under their management increase. It is important to see how a CTA manages those increases.

4. Past performance is no guarantee of future results

There are no guarantees. We expect that you realize this. That being said, historical performance is one toolS for you to use in evaluating a CTA's performance.

Take into consideration all we have said above. When choosing a CTA, take into account draw-downs versus year-end results. Ask yourself if your financial makeup is consistent with the CTA's trading style. If so, you may have found a CTA you are comfortable with. If not, continue to look until you find a CTA you are comfortable with.