Differences between Forex, Equity and Commodity Trading

Differences between Forex, Equity and Commodity Trading

Broadly, there are three different markets for an investor to trade in – forex, equity and commodities. The foreign exchange market as the name suggests deals in trading of currencies of different countries. The commodities market is rife with metals, energy and agricultural produce., the equity market on the other hand deals with industries, companies and their shares and stocks. As a first time investor, it is essential that you are aware of what these industries entail and how you can trade in them. The commodities on a commodity market are traded on the commodity exchange in India.

Alternatives to traditional trading :The foreign exchange and the commodities market offer significant alternatives to trading in stocks and shares of companies listed publicly. On these markets you trade in currencies like USD,GBP, EUR,JPY and commodities like cotton, oil,natural gas and many more.

Simplified trading: Commodity trading is relatively simpler when compared to trading in equities or forex markets. Commodity trading when done properly returns significantly beter results. The rigour involved in trading in commodities is much lower when compared to fores or equity markets.

Periodic trades: The commodity market offered extremely flexible hours to trade, it is generally open between 10AM to midnight whereas the stock exchange is active only for the shortest window in a given day.The forex market also operates on a larger window, they are open 5 days a week and are open 24 hours a day.

Short Selling:The margins on a forex market are much lower than the margins on a equity trade.However, a forex market offers a much better opportunity to sell short than an equity market. Additionally, short selling in the stock market is extremely regulated and quite cumbersome to execute the right way.

Volatility:Forex markets are extremely stable and major fluctuations only when world altering events occur, which is ntofrequent.However, a stock market is prone to extreme volatility.Stock prices can waver over 20% on other side on any given day. Commodity markets are also fairly stable and do not oscillate more than 6% in either direction. For commodities in the field of agriculture, this is much lower and is capped at around 4%.

Brokerage: Brokerage is pretty standard across all three fields. Since a brokerage primarily depends on the volumes traded, forex trades, which are generally executed in bulks tends to edge out the other two markets when it comes to brokerage. Using a mcx brokerage calculator, the brokerage that has to pay can be easily calculated and mitigation plans can be devised.

The influx of technology has made is extremely easy for a lot of newcomers to entire the once arcane field of trading. The wealth of information available only has made a world of difference to any person entering the market for the first time and deciding on which market to enter. The explosion of stock brokers of all types has also made it easy for people without a lot of time on their hands to enter the market under expert guidance.