Before understanding the differences in trading futures and commodities, it is important to know exactly what they are. Commodities are all natural things that are planted or found in nature. The list of commodities includes:
- Light crude oil
- Natural Gas
- Unleaded Gas
- Gold
- Silver
- Aluminum
- Copper
- Platinum
- Coffee
- Cocoa
- Wheat
- Soybeans
Firstly, learning to trade commodities is an arduous task. If you were to search online for sites or e-books which can teach you, it is nearly impossible to find without having to pay a large upfront fee. With FOREX, this is not a problem. There are many places which not only provide free information, many brokerages actually offer ‘demo’ accounts, with which a trader can use fake money to trade using real-time information. This is perfect for people who would like to learn FOREX without putting any of their money at risk. This is generally not an option with commodities.
Next, there is the question of the profit margin. In this area, commodities are the better of the two. However, this victory is not without its inherent risks. With FOREX, it is very simple to buy and sell without taking very large losses in the event of any kind of a catastrophe. This is not the case with commodities. It is extremely easy to go bust very quickly in the event of a natural disaster or other problems of that nature. For example, if you invest a large amount of money in wheat and the years crop is extremely lower than expected due to drought or natural disaster, it can easily become a disaster for your wallet. This is eclipsed however by the extremely large profit that can be made trading commodities. In an extremely good year, it is actually possible to make up to 500% return on your money.
Clearly, both options have their positive and negative aspects. As always, it is the traders job to do their homework and to fully understand the risks involved with these types of markets. The money is there to be made with just a little bit of research and care.
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This post was written by admin on September 15, 2008
