Why I find Forex to be harder to trade than commodities

To the regular person, Forex almost universally is regarded as the best way to get money quickly and simply. I feel that this is because of a lack of information – they are misinformed, if you will. Professional traders may come up with all sorts of reasons as to why Forex is hard to trade, using terms that I would find hard to understand at first glance. But for me, the one reason as to why Forex is harder to trade than commodities is:

You’re speculating on two things rather than one.

When you trade Forex, you have a base currency and a counter currency, for example in EUR/USD, the euro is the base currency and the dollar would be the counter currency. The price that you are quoted is basically the amount of the counter currency that it will take to buy 1 unit of the base currency. When you trade commodities, for example WTI Crude Oil, you are only speculating on the price of the commodity in question, in this case oil.

What makes Forex so difficult is that even if the base currency goes up in value, increasing the value of the currency pair, the counter currency could, potentially, go up an even bigger amount. Granted, some currencies go up as others go down, and this can be an opportunity for exponential gains, however, even if half of your speculation comes true, the other half could still put you in the red.

I see it as, the probability of you making money on Forex (with no prior speculation) is 1/4 (1/2 / 1/2), and the probability of you making money on commodities with the same conditions is a 1/2. So it’s really just simple maths, and for this simply reason, I believe that Forex is far harder to trade than commodities.

This is not meant to be a Forex-bashing post, as I also believe that Forex has a greater opportunity to make one gains than commodities. However, you will have to beat the odds to get there.

By Shrey Srivastava

A finance and economics enthusiast, and someone who wants to share his views with the world.

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