Choosing where to invest your hard earned money is an important decision, and one that should not be taken lightly. You may have heard many stories of people becoming fabulously wealthy in a short amount of time by investing in the forex market or commodities.
What you do not always hear about are the opportunities to lose money in the markets due to their high volatility and unpredictable nature. When deciding is trading forex or commodities better it is important to take into account your own risk-tolerance level, your investment objectives, and the time frame for your investments.
With any investment strategy, thoroughly research any potential investments to assess their suitability for your circumstance and temperament. Develop a plan of action that includes profit taking as well as stop-loss levels and stick with it. Also, shop around for thee best forex brokerages for your investments needs.
Your Personal Preference
You may feel more at ease with a specific type of market, and it is always best to feel comfortable with the market you are investing your hard-earned money in. You may like the foreign exchange market for its fast pace, and opportunities to realize spectacular gains, or the volatility and constant pace may not suit your investing style.
You may feel as though you have more of a connection to commodities in your day-to-day life, and therefore, may be more comfortable investing in the commodities market. The commodities market is still a physical market, which some investors prefer.
Both markets vary considerable when it comes to regulations. The foreign exchange market is overseen by the FXDC (Foreign Exchange Dealers Coalition), an alliance of the largest US FX market dealers. The forex market is considerably more relaxed than the commodities market, with the few regulations that do exist easily circumvented.
The commodities markets in the US are regulated by the CFTC (Commodities Futures Trading Commission), which was created in 1974 by congress. This commission is similar to the SEC for the stock market. The Commodities Futures Trading Commission protects the public and the market participants from fraud and manipulation.
Use Of Leverage
Leverage is used in both the currency market and the commodities market, but it is utilized far more extensively in the forex market. It is also easier to obtain high leverage in the foreign exchange market. With only a few hundred dollars, you can control thousands.
It is also an option to use leverage in the commodities market, but it is considerably less spectacular than in the forex. Using leverage can be both a plus and a minus. While you may be attracted to the gains that can be made, you must keep in mind that the flip side is the potential for equally spectacular losses.
In the end, it all comes down to what you prefer, what suits your investment style, and fits within your risk-tolerance levels.