The Benefits of Diversifying Your Trading Portfolio: Forex and Commodities

Market volatility can hold a lot of risk for traders. The Forex market sees a volume of average of 6 trillion dollars. This highlights the importance of risk management while trading such a big market. By mixing between Forex and commodities trading, traders can create a more balanced and less-risked portfolio.

Forex and commodities hold a difference in volatility.  For example, currency pairs often react to interest rate changes and commodities might be affected by seasonal patterns. Understanding the difference between the two can boost the traders’ confidence in making decisions while opening a trade.

Combining different assets within the portfolio will balance the risk on the trader’s account. Commodities like gold and silver are often viewed as hedges and a protective wall against inflation.  Commodity trading can protect purchasing power in hard economic times.

Before deciding how much to allocate to Forex and commodities, the trader shall assess how much risk he or she must balance within the account. Choosing how much risk (such as using a stop loss) is crucial to protect the account from reaching a full margin.

There are different methods to balance the risks such as splitting the risk in half between forex and commodities equally. Or another way is to split it according to the volatility of each asset. Using Meta trader 5, the best trading platform allow you to choose your Stop Loss along with other technical indicators to make informed decisions and lessen the risk.

Diversifying your trading portfolio by combining Forex and commodities will allow the trader to manage and control their risk. Of course, this does not mean there won’t be risk on the account, however the risk will be controlled and balanced in case of a sudden market moves.

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