Why FOREX is seen as "a better" option
for investors when compared to Stock Market?
This article tries to highlight why FOREX is considered a better option
for investors when compared to Stock Market.
Profit in an up or down market
Unlike the equity market, with FOREX there are no restrictions on short
selling. Profit potential exists in the currency market regardless of
whether a trader is long or short, or which way the market is moving.
Since currency trading always involves buying one currency and selling
another, there is no structural bias to the market. This means a trader
has an equal potential to profit in a rising or falling market.
Pay zero commissions or exchange fees
No commission or exchange fees to trade FOREX online or on the phone. In
the equity markets, you must pay both a commission and exchange fees.
The over-the-counter structure of the FOREX market eliminates exchange
and clearing fees, which in turn lowers transaction costs. Costs are
further reduced by the efficiencies created by a purely electronic
marketplace that allows clients to deal directly with the market maker,
eliminating both ticket costs and middlemen. Because the currency market
offers round-the-clock liquidity, you receive tight, competitive spreads
both intra-day and night. Stock traders can be more vulnerable to
liquidity risk and typically receive wider trading spreads, especially
during after-hours trading.
Up to 50 times the leverage of trading stocks
Trading FOREX gives you up to 50 times the leverage of trading stocks.
In stocks, for every $1,000 cash you invest, you control a maximum of
$2,000 worth of stocks. The maximum leverage is 2:1. But with FOREX, if
you invest $1,000 margin on a foreign currency trade, you can control up
to $100,000 in currencies.
Trade mini contracts for as little as $300
Many brokerages do not allow you to invest in odd lots, but only in
blocks of 100 shares at a time. With many stocks valued at between $30
and $200, that can mean an investment of $3,000 to $20,000 or more. But
with FOREX, you can invest in foreign currencies for as little as a $300
deposit with mini contracts. The smaller trade size enables you to take
smaller risks. The FOREX mini is intended to introduce you to the
excitement of currency trading while minimizing your risk. You can try
out the demo account and paper trade or you can open up a mini account
right now and trade for real.
If you like technical trading, FOREX is perfect for you
The strong trends that foreign currencies develop is a significant
advantage for technical traders. Unlike stocks, currencies rarely spend
much time in tight trading ranges and have the tendency to develop
strong trends. Over 80% of volume is speculative in nature and, as a
result, the market frequently overshoots and then corrects itself. A
technically trained trader can easily identify new trends and breakouts,
which provide multiple opportunities to enter and exit positions.
Analyzing countries is easier than companies
Countries are often more stable than companies and it's easier to
predict their overall economic direction. Currencies are traded in
pairs, so if a trader buys one currency, he is simultaneously selling
the other. As with a stock investment, it is better to invest in the
currency of a country that is growing faster and is in a better economic
condition. Currency prices reflect the balance of supply and demand for
currencies. Two primary factors affecting supply and demand are interest
rates and the overall strength of the economy. Economic indicators such
as GDP, foreign investment, and the trade balance reflect the general
health of an economy and are therefore responsible for the underlying
shifts in supply and demand for that currency. There is a tremendous
amount of data released at regular intervals, some of which is more
important than others. Data related to interest rates and international
trade should be most-closely examined.
Trade 24 hours a day
After-hours stock trading is not a very liquid or easy market to trade.
But with FOREX, you can trade 24 hours a day in the largest, most liquid
market in the world. |
