Forex or Commodities?

I have never traded and am just starting to look into it. My question is whether for someone with little capital - a few thousand dollars - but who’s eager to really learn what it takes to do well and understands money management and isn’t likely to be a victim of a scam the foreign exchange market or commodites would be a better place to start. Having perused the educational part of this site I feel a bit discouraged - forex seems to require more money than I can risk. Thanks for any opinions?

i’m not sure that the comods contracts are any cheaper to trade,

With forex you have fundamentals, with the comods the weather can really kick them into touch, also the exchanges close, where as forex is a 24 hour market. dont get me wrong i personally know somebody at work who has made a fortune trading metals, but he really knows what hes doing, hes been trading them and only them for almost 15 years.

If you are not confident you can start of slow with very little risk with a micro account.

I’m not sure you can do anything similar with the futures markets.


Since you’ve asked, yes. There are opinions aplenty here. :slight_smile:

I’m going with Forex.

First, you don’t need to have any money whatsoever to start learning the foreign exchange. Go to Oanda and learn to do it using hypothetical money. Some people frown on the concept of ‘demo trading’, as we call it, but I have found it an invaluable and risk-free method of working through the confusion and figuring out what the Forex can do for me. The demo account there never expires; you can use it to learn your way around the system and then to test whatever ideas you want to experiment with.

When you’ve gotten the hang of trading with monopoly money (having spent, I’d say, a minimum of two months at it), you can open a live account through them and trade as little money as you like. Oanda lets you trade individual units rather than requiring you to buy or sell entire lots. Again, some traders frown on the concept of going into the Forex with so little capital, but none of them have demonstrated to me why trading small is any riskier than trading big, as long as you scale your trades proportionately. The biggest complaint I’ve heard there is that you won’t make enough money if you don’t trade big, but guess what? You won’t lose so much money trading small either. Wouldn’t you rather make your biggest mistakes while trading small, and get the experience that will help you make better use of the bigger trades later on?

Those are my thoughts on the matter. Just be patient and give yourself the time to learn it. There’s no hurry to risk large amounts of money. The market will still be there when you’re ready to join the big leagues.

Thanks, n atab and genghisclown, for your replies. A further question. Could a reasonably competant trader hope to build up capital for bigger trades starting with an investment of two or three thousand dollars or would fees and narrow stop loss orders reduce profit to a snail’s pace - thousands of hours, say, just to double one’s investment?

As I stated in my previous post, you should expect to invest quite a bit of time learning to trade [B]profitably[/B] before you expect to invest any money. When you do invest money, you should then expect to spend sufficient time verifying that your chosen method does indeed work in the real market as well as the demo trading. Only after you have invested the time in this should you even consider trying to invest all of your available funds. You shouldn’t even be [I]thinking[/I] about doubling your capital until then. Seriously.

Think about it. No one in any other trade I know of gets rich while just starting out. A master woodcarver who demands high fees for his services once had to start out just learning how to use his tools and what mistakes to avoid. He had to spend years honing those skills before he could think about earning those high fees. It didn’t happen quickly.

Yes, as far as I know you can reasonably expect to build your capital as you go. I expect it will be slow going, if you do it right. If you treat this thing like a get rich quick smorgasborg, I guarantee it’s going to eat you alive.

Yes, I understand what you are saying. I don’t believe in get rich schemes either and understand it would take a great deal of time and effort. But the question I have is whether it would ever be worth that effort, no matter how knowledgeable I became, without more capital than I currently have?

i’ll give you my honest answer to your question.

With little capital it does reduce your chances greatly and that is for any market, basically it would mean you would have to win big with every tread to make any real money, and to do that you would have to risk big.

With any form of trading you have to understand the risks and be prepared for some losses, nobody in this game is 100% right all the time.

I hope that answers your question.

n aftab - Thanks, that’s what I was afraid of. Anyway, maybe I can still make a few dollars in my spare time after more study.

Reduces your chances for what, exactly? :confused: If you make proportionately smaller trades, do your chances of succeeding not remain exactly the same? No one has yet demonstrated to me otherwise.

Yes, if you’re trading less money then you stand to make less money, but that just means it will take you longer to make the money than someone who has more money to trade. That’s just plain common sense, though.

Genghisclown - I don’t have much knowledge of trading but in my attempts to learn more about it I immediately recognized the resemblance to poker. In poker a small bank roll is a double whammy. First the percentage of your profits is reduced by the antes, which like trading fees, don’t vary no matter how much you bet and second you can’t afford to take the occassional risk that very well might pay off big because it will bankrupt you if you are wrong. And inevitably where’s there’s incomplete knowledge there’s the possibility of being wrong. I liken the situation to an airplane . If it hits turbulence when miles over the earth and dips a hundred feet - no problem, but if it has just taken off ( meager bank roll ) it crashes and burns.

That isn’t true. The spread you pay is based on pips, and the value of the pips in your trade is proportional to how much you’ve put into the trade. So, the spread DOES vary, depending on how much you ‘bet’.

If you’re going to treat the Forex like it’s Las Vegas, you’re going to get burned anyway. My whole point in starting small is learning to manage the risk at the small levels so you’ll understand exactly what you’re risking when you encounter those possible big payoffs later. If you don’t take the time to learn what you’re doing, you’ll end up bankrupting yourself chasing after payoffs you aren’t trained to recognize or trade for.

Again, since the ‘turbulence’ scales to the size of your exposure (pip value is not constant), this metaphor appears to me a red herring. A fifty pip loss is a fifty pip loss whether I have a thousand dollars in my account or a million. It all depends on my exposure, which you might recall is appropiately proportioned according to the size of my account.

That is why I recommended Oanda. They allow that type of trading without making you pony up so many dollars per lot. I can scale my trades to whatever percentages I deem appropriate. With other dealers, yes, account size would be an issue.

So again I ask: how is the risk any larger for trading a proportionately smaller account than it is for a hundred thousand dollar account? Besides the proportionately smaller profits that seem to be the only legitimate (albeit weak) complaint I’ve heard against this idea.

I’m curious to know what I’m missing here.

Reduces your chances for what, exactly? If you make proportionately smaller trades, do your chances of succeeding not remain exactly the same? No one has yet demonstrated to me otherwise.

Yes, if you’re trading less money then you stand to make less money, but that just means it will take you longer to make the money than someone who has more money to trade. That’s just plain common sense, though.

It ain’t rocket science… it’s POCKET science.
Keep on pippin’…

I would recommend to read the last chapter of babypips school… [B]The number one reason new traders fail is not because they suck, but because they are undercapitalized from the start and don�t understand how leverage really works.[/B]… Read that chapter, its really useful and interesting for start fx trading the right way


Thank you for the response, but I’ve been through the entire babypips school several times and nothing I remember from it answers my question. Moreover, this is a question I have asked at least twice on these forums and no one has yet proven to me exactly how it is so much more dangerous to start out with less money than with more.

I think it is because most people are used to having to buy currency pairs in specific lots. I don’t trade the forex that way. My dealer doesn’t make me do that; they let me buy individual units. With that in mind, (assuming, as I stated earlier, you scale your exposure accordingly), as far as I can tell, there is no difference whatsoever in the risk of trading $100,000 or $1,000. Except that you’re risking more with the $100,000 than you are with the $1,000.

Feel free to demonstrate otherwise, if you can.