Forex and commodity trading is been around for many years yet which is more profitable remains a big question among traders. In Forex market the cost of transaction typically built into price spread. The successful traders believe in consistency, they will look to make money, but they will try to achieve their goals, in trading you should put lot of efforts and wait patiently for sure you will succeed in trading.
Apart from making profit in trading the trader should learn to manage risk, it helps the traders to prevent from high loss, which best quality required for a successful trader.
While in commodity trading a basic good used in commerce that is interchangeable with other good of the same type. In ancient times the commodity trading involves in grains, oil, gold, and a natural gas. For the investors, these goods can be an important way to diversify their portfolio beyond traditional securities.
Commodity trading for beginners can made easier with CFD’s which is one of the most straightforward trading option in commodities. It is mainly based on certain exchanges, so in these kind of trading the traders aim will be profit off the changes by buying and selling these commodities.
What is Forex Trading
Forex Trading is the worldwide trading market, which is the worlds largest and liquid financial market. It involves exchange between two currencies. The Forex trading process in which order to buy one currency, you should pay the currency of another.
This is a platform which allows you to exchange one currency for another. In this multinational corporations use to trade currencies on a continuous basis. It is beneficial for financial institutions because it allows them to place bets and hedge on currency pairs.
It is a global trading market and it will continue as long as market is open in the world. You may know that Forex a liquidity, here the liquidity refers to converting asset into cash, that converted quickly.
Forex trading is generally a speculating process on currency prices to make a profit, in this currencies traded in pairs so by exchanging currency a trader is speculating whether one currency will rise or fall in value against the other. It will make you rich if you are hedge fund with deep pockets or an unusually skilled currency trader.
Even the beginners with little experience can also use Forex trading. Because attractive market, accessible, only small amount of deposit fund required for traders to get involve. It will be available for 24 hours per day and five days a week.
What is Commodity Trading
It is always been seem as a ladder that drive the growth of the economy, economies of many middle eastern countries have developed because they possess an important commodity, crude oil. It can used as a alternative for investors to diversify their portfolio investment, beside securities. There are many kinds of commodity trading like metal, energy, livestock, meat and agriculture.
In this trading various commodities and their derivatives products sold and bought. Simply Commodity trading involves in trading of any raw materials or any primary agricultural products. Commodity trading involves different types of contracts that derive their underlying commodity from their value.
In India spot, future, and options contracts included in commodity contracts. Using futures contracts, you can make profits, which is an agreement to sell and buy commodity at a specific date and price. You can make money in this if you are right about the underlying commodity price, but can also loss in this.
Safest commodities to invest in is a silver and palladium because of market uncertainties, while demand for commodity like copper may strengthen due to increasing manufacture and construction activity.
Difference between Forex Trading and Commodity Trading
The trading securities of the products are the main difference between Forex and commodity trading. Simply commodity trading in agro products involves coffee, cotton, some mined products like gold and oil. The Forex market, involves in trades in different countries currencies like dollars,yen,euros and is global.
Trading and analysis in these markets are similar, however these two kind of trading will have its unique factors to trade in it, further we can see in detail about it here. Some traders feel comfortable dealing in specific kinds of markets, so these kind of traders like commodity trading because they are physical products which will help them to understand it better.
We daily use these commodities, so the traders can get information about it easily,some traders who are experts for EURUSD, some traders excellently know British economy and trade only in GBPUSD, and some like to trade in only gold or oil.
Forex or Commodities
The main advantage of Forex trading than commodity trading is, it is in better liquidity, less impact of fundamental analysis than commodity trading. Unexpected news of strong volatility and raw products can create a high risk for commodity trading.
In stock trading the trade equity securities and they sell and purchase shares of different companies and try to make profit from stock price fluctuations. Commodity traders trade and also invest in physical substances, Forex exchange is a global marketplace for exchanging their national currencies to one another nations currency.
Forex markets have not a high strict regulations while comparing with highly regulated commodity market. In Forex trading also some of the regulations. But not strictly enforced, brokers and traders bypass these rules. At the same time some traders like to trade in a market like which regulated by the government. Because their assets will be safe.
Forex traders can access a large amount of leverage while trading in Forex when their account opened with the Forex broker and add funds to the account. There is some leverage in the commodity market, but it is far less than the leverage for Forex trading.
Exchanges for Trading
Forex traders finalised over the counter with Forex brokers or through the inter bank of market. While commodities traded on the exchange. Even they can traded on the exchange, there will be limits to the daily range of the commodities traded on the exchange.
In this a certain limit reached the market will reached its limit up or down, and further trades will not allowed for the commodity. If a trade done by the commodity trader that badly affected by the exchange limit. It could result in loss since the prices will remain the same.
The loss may occur in Forex market. They can trade whenever they wish, exchange limits implemented in the commodity markets. If a trader wish to get both the advantages of Forex and commodity trading can opt for trading in commodity based currencies.
In Australia if dollar positively correlated to spot gold price, fluctuation may occur in correlation strength. Similarly in New Zealand’s economy depend on the dairy sector. Its currency is correlated to the whole milk powders price. The Canadian dollar is correlated to crude oil prices, so the Canadian dollar also increased, since when the prices of oil increased from 2014 to 2016.
Which is Better for Trading
Both the markets offers us a huge opportunity and they are excellent, so the trader only need to specialise in markets which suits them , either Forex and commodity or only some type of stocks or currency pairs. But in Forex you can a profit which will be in incredible level. Because it has gauging movement in Forex could be easier due to market liquidity is increased over stocks.
Forex has growing for the last 15 years whereas the these market has returned to pre 2001 volume, small Forex market movement can lead to large gain or loss. The same movement with stocks can be relatively have less impact.
You can trade in Forex 24 hours a day and five days a week which means you can access the market for longer than NYSE’s it is 8/5 hours operating. The currency of emerging markets are also linked to grow in prices of commodities, they are correlated with US dollar, these currencies have high rollover, and trading these currencies can help offset the volatility observed for commodity trading.
Forex and commodities can be done future exchanges in trading, but commodities are not traded on the Forex market. While Forex trading is less regulated and commodity trading is highly regulated. Leverages were used in both these trading, but Forex traders use more leverage than the commodity traders.
Simply a Forex trading is currency exchange you do while travelling to abroad, in which traders buys and sells one currency to another and the exchange rate constantly fluctuates based on demand and supply. While in Commodity trading you will trade using goods which you use in your daily life, so you will easily get information’s about it.
But while trading in Forex the possibilities of getting profit is high and it is a trustable platform used by the traders since for past 15 years. At the same the main quality required by the trader is patience while trading.
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