Trading Forex Vs. Trading Commodities
Both the forex and commodities markets are incredibly popular in the world of trading. It can therefore be difficult to ascertain which may be the most beneficial to different budgets and strategies, especially to prospective traders with little experience. Considering this, here are some of the main advantages and disadvantages to each.
Forex
Advantages
The forex market is accessed my many traders worldwide through brokers like Oanda, and is both fast paced and liquid. You have plenty of choice for investment as you can access most of the world’s currencies, which leaves plenty of room for diversification.
The market is also open 24/5, which allows flexibility in your trading schedule and ensures opportunities to trade are never missed. Many brokers also offer high leverage on investments, meaning you can control large volumes of currency with far less capital.
Disadvantages
As an incredibly volatile market, currency values are constantly changing, and as such investments can decrease very quickly as well increase. This can make currency movements hard to predict and act on.
The external factors which influence currency value, such as political elections or economic performance, can also be unpredictable, increasing uncertainty over investments. High leverage can also lead to magnified losses if the market moves against you, which is something every trader should look out for.
Commodities
Advantages
Since commodities are tangible assets, their core value rarely decreases, and as such they normally retain their value (or even rise in value) in times of economic crisis. Some, such as gold, are known as safe haven assets as a result.
It is fairly easy to research the activity of worldly commodities, and as such predict their potential price swings. For the oil market, for instance, you can research overall world oil production to see how the market might behave.
Disadvantages
Some commodities, especially those which are steadier, offer low levels of return, especially in the short term. Therefore, they are not suited to every type of trader, especially those who want to make higher volumes of traders per day.
Both the forex market and commodities market require different strategies for success, and each suits different types of traders. There are those who thrive on the fast paced, nonstop nature of forex, as well as those who prefer steadier investments in commodities. It is worth considering that each currency pairing and individual commodity is different, however, and have their own unique behaviours. Do plenty of research into both if considering them as a trading option.
