Forex Options Trading - Commodity Currency
Posted on Apr 30, 2010 under Foreign Currency Exchange |
In forex terminology, commodity forex trading refers to the exchange of a country that depends highly on exports. The countries that have commodity currency are those that have economies that rely chiefly on exporting raw materials to gain income. In a way, their economy depends on the foreign market.
Commodity exchange is probably the closest forex trading or any other speculation stoop to the level of the real economy since it involves the status of tangible goods instead of finances. Learning how to trade with commodity currency entails some knowledge on the economic status of the country that uses the currency to be able to speculate on how much income is derived from exports.
Most countries that have commodity currency are developing countries such as Papua New Guinea, Tanzania and other countries located in Africa and Southeast Asia. But there are also developed countries such as Australia and Canada that are viable for commodity forex trading. In fact, in forex trading, Australian Dollar, Canadian Dollar and New Zealand Dollar are generally considered as commodity currencies.
Another example of commodity currency is South African Rand which relies chiefly on exporting gold. The US Dollar is sometimes considered as a commodity and currency as well.
According to the International Monetary Fund (IMF) World Economic Outlook, there are 53 developing countries and 5 developed countries that depend on commodity exports. On the IMF study, it was shown that real commodity export prices influence the movement of real exchange rates in commodity with currency countries. Whenever a deviation on the real exchange rate on commodity currency countries occurs, it can easily be attributed to the fluctuation of real commodity prices.
Timothy Stevens
http://www.articlesbase.com/currency-trading-articles/forex-options-trading-commodity-currency-711980.html
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April 30th, 2010 at 12:18 pm
Whats better to trade FX with out of options, spread betting or spot trading? Whats best for UK resident?
Currently at the time of writing I am 18 years of age and I have been practicing stock, commodity and currency trading in several different practice accounts. What I have discovered is that I am best at currency trading and I make the most money out of trading that way. With stocks and commodities I have had moderate successes but I’m better at FX trading than anything else and I’ve learned a lot too.
I also know that currency tends to trend long term such as a few months to a few years which is where currency options are best suited. Spot-forex trading on the other hand is traded on margin and is best suited to short term trading of the FX markets.
I have only had practice trading FX in spot-forex and spread betting, both of which had a return of several hundred percent. What I would like to know is what is the best way to trade forex out of currency options, spread betting or spot FX, and which is best suited to a UK resident to gain wealth? Please help/advise. Thanks.
P.S. Sorry its so long.
April 30th, 2010 at 5:20 pm
For what you want to do, xe.com is the place to start, but be *very* aware that retail forex trading is essentially a mugs game. You have to be extremely careful about it and spot trading requires a lot of time and nerve to do well (or, even, successfully).
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April 30th, 2010 at 5:22 pm
The answer is really very simple. if you are in the UK you should go through the spread betting route because all gains are tax free. All the instruments you have mentioned are traded on margin so are equally risky but the difference is that if you trade spot forex or currency options you will have to pay tax on your gains!
References :
http://www.financial-spread-betting.com/Tax-free.html
April 30th, 2010 at 5:24 pm
Spread betting is best, it is tax free and the spreads are virtually the same as the spot market nowdays.
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