by Christopher Johnson

Created on: January 27, 2008   Last Updated: March 19, 2010

Forex trading will always be the more volatile when compared to commodities trading. Now both are extremely risky, but commodities trading is a little easier to judge. See some commodities can be tracked by things they are related to. For instance you can track beef commodities by looking at the stocks for major grain companies, or vice versa.

Also most commodities trading is done nationally. Some exportation does account for some of the numbers, but for the most part the numbers reflect domestic usage. This means that by studying the local markets, or one or two foreign markets that consume the commodity you are trading, you will have a better understanding of that commodities market.

Forex, however, is entirely 50/50. Half of your trade is focused on the value of a currency in one economic microcosm, and the other half is based in a totally separate economy. Most pairs are trading in currency that you won't even be using. For example, a person in the US might trade a pair that is Yen/Euro. Meaning that they are either selling yen to buy Euro's or selling Euro's to buy Yen.

Knowing the value of money in your own economy can be a full time job for some, but trying to figure it out for two economies that you aren't even a part of is down right confusing. You must also remember that every countries economy and monetary system is related to it's politics. If Japan goes to war with Russia, both economies will be effected, and it's hard to say which one would come out on top. Not to mention that each country can control the type and quantity of media information that comes out of it. North Korea is a great example of this. Not even foreign made movies are allowed into the country.

So the only information that you have about the political and economic standing of the country, is the information that they allow you to have. At least with commodities trading, your economy is probably a participant in the trade, and you should have some idea as to the general health of your own economy. Most commodities trading is conducted though reputable boards or exchanges, forex is still a relatively unregulated and fractured industry. Not to mention the fact that you can gage the general value of a commodity, but a currency is harder due to many countries operating on a "fiat" system.

Commodities offer a risky trade, but they are also based on concrete goods, and are usually easier to gage because of the relatively limited number of economic considerations in play. Forex will always be riskier due to it's lack of regulation, multiple economic concerns, and fluidity of political risk.

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