In Foreign Currency Exchange (Forex) Trading, you try to guess whether the currency of one country will go up or down in relation to another major currency. When you trade on the Forex, you buy and sell pairs of currencies. There are pairs of national currencies that go up or down together.
When you trade commodities, you decide if the price of a certain commodity will go up or down based on whether you think there will be a good growing season, more mining opportunities, a bad growing season, floods, drought, strikes, etc. When trading commodities, nature has a much bigger impact than when trading currency. "It's not nice to fool Mother Nature," we all know.
World Happenings:
As was already said, the fact that weather patterns change all the time from year to year can mess up the commodities market. If it's not the weather, it could be a strike by miners, the discovery of new minerals, dry holes, war, or any of a number of other things that can completely change the outlook for commodities. On the commodities market, you could make a lot of money, but you could also lose a lot of money if crops fail or something else goes wrong. When you play the commodities market, you have to be very careful. Changes in the rest of the world can also affect the Forex Market, but they usually have less of an effect on your portfolio than changes in commodities. Overall, the Forex market is the better place to put your money.
Information on Forex Trading is Easy to Find:
It can be hard to find information about trading commodities, especially information that is free. There is a lot of information out there, but most of it costs money to get. There is a lot more Forex information out there, and most of it is free. You can also sign up for practise accounts on many Forex sites to try trading without putting your money at risk. This is a great way to start learning about Forex Trading and gives you an idea of what you can do. Most of the time, you can't get these practise accounts in the commodities market.
When you're open:
The Forex Market is open five days a week, 24 hours a day. No other market is open for this long. If you trade on the Forex, you have more time and chances to finish your trades and make more trades than if you trade on commodities or any other market.
Liquidity - How easy it is to buy and sell:
Again, compared to all other markets, the Forex Market does the most business. If buying and selling positions is going to be easy, Forex, with all its volume, will be the easiest.
Almost always the same:
Prices for goods can go all over the place depending on things like demand, the weather, the amount of crops planted, whether or not oil is found, etc. The Forex market is more stable. Even though currency prices can change and become volatile at times, Forex tends to follow more of a pattern. On the Forex market, there are more trends that can be followed than on the commodity market. This can make it easier to trade the Forex in a consistent way.
Trading with no fees and immediate order execution:
Because the Forex Market is an open market with no central trading floor, you don't have to pay a middleman when you trade there. That is, you don't have to pay a fee to trade. Institutions make money on the difference between the bid price and the ask price, but this is true of any market. You don't have to pay commissions or fees, which can save you a lot of money over time.
Both Trading in Commodities and Trading in Forex can be fun and profitable. It's up to each investor to figure out which is best for their own situation. Forex Trading is hard to mess up because there is more information about it, and most of it is free or very cheap. There are also free demo accounts you can use to practise trading.
