Definitions
What is Commodity Trading Advisor (CTA)?
Commodity Trading Advisor (CTA) is a person who, for compensation or profit, directly or indirectly advises others as to the value or the advisability of buying or selling futures contracts or commodity options.
Advising indirectly includes exercising trading authority over a customer’s account as well as providing recommendations through written publications or other media.
CTA is a kind of hedge fund and is an abbreviation for Commodity Trading Advisor.
CTA collects funds from investors around the world and manages large amounts of money like many hedge funds.
CTA is pursuing high returns while minimizing risk while performing advanced risk management such as determining the amount of positions and the percentage of loss cuts according to volatility.
Since it is not an investment trust, CTA does not use S&P as a benchmark and pursue absolute profit.
Although it is called a Commodity Investment Advisor, its investment destinations include not only commodities but also physical stocks, foreign exchange, index futures and bonds.
How does CTA trade in the market?
The CTA often buys and sells by utilizing an independently developed automatic trading program, and trading is done 24 hours a day by incorporating algorithmic trading.
Trading methods other than automatic trading are not simple ones such as orders following a trend straightforward or contradictory that expects a trend change, but use any investment method such as arbitrage that focuses on the price difference of different investment targets, as they increase the usage profit.
Sometimes CTA uses huge amounts of money to update the high and low prices.
Also, if there are rumors that “CTA sales have been sold for Nikkei 225 futures,” it may have a negative impact on prices.
Aiming at a short-term margin of the market, CTA also buys a large loss cut order up to a certain price, and make a profit decision while involving the loss cut order.
When such a sale is made, the market price may move significantly in the short term, but it often returns to the original price.
Since CTA raises funds from wealthy investors, investors, and financial institutions around the world, the amount of its operation is huge.