Commodity forex trading is a remarkable concept for many beginners. Commodities are not traded on the foreign exchange market, only currency is traded there. So why introduce them into a foreign exchange trading system?

The explanation is that commodity prices can affect currency costs. Although we aren’t trading in the price of raw materials directly, in some cases the cost of a currency pair could be more or less linked directly to the cost of a specfic commodity. This is because the economies of many nations are based around a specific import or export. But where they’re exporting or importing raw materials, also known as commodities, changes in the cost of these things will have an enormous effect on the nations’s commercial situation. Clearly lots of the nations that rely on one of those commodities, are little or developing states whose currency wouldn’t form part of a major pair. These currencies are not going to be useful to most foreign exchange traders.