Should you trade forex or stocks?


Forex vs Stocks - Traders all over the world are switching to forex trading because of the many advantages of the forex market over traditional stocks.

The truth is that Forex is the cheapest market to trade in the world. How many major currency pairs are there? Currencies are traded in pairs. For now I just want us to be clear on the terms and what they mean.

Forex Versus Indexes

Be it stocks, futures or currency, these rules stay the same: the lowest risk and highest reward trades with the odds in our favor can be found by buying at demand and selling at supply. This remains the same no matter what you are trading, in my humble opinion.

Competition between them is so fierce that you are almost always assured that you get the best deals. Forex traders get quicker access and cheaper costs. The stock market is very susceptible to large fund buying and selling.

In spot trading, the massive size of the forex market makes the likelihood of any one fund or bank controlling a particular currency very small. Banks, hedge funds, governments, retail currency conversion houses, and large net worth individuals are just some of the participants in the spot currency markets where the liquidity is unprecedented.

Have you watched TV lately? It is the nature of these relationships. No matter what the government does to step in and discourage this type of activity, we have not heard the last of it. Relationships are mutually beneficial and analysts work for the brokerage houses that need the companies as clients.

That catch will never disappear. Analysts in foreign exchange have very little effect on exchange rates; they just analyze the forex market. In the battle between forex vs. Stocks shows a strong victory by Mr. Forex brokers usually do not charge any commissions or transaction fees to complete a currency trade.

This spread is always fully transparent and you know exactly how much the broker is making — free of charge to you. This results in Forex trading costs which are lower than those of any other market. What did you hear? You probably heard recommendations by an analyst to buy such and such stock or to hold a particular stock, etc.

The relationship between analysts, brokers, and investment houses is a tricky one. No matter how much government intervenes there are always going to be analysts that drive up the value of a particular IPO or brokers that receive higher commissions for selling a particular stock. The size of the Forex market makes it very hard for a government, bank, or hedge fund to influence the value of a particular currency pair.

The currency market is driven by global economic forces which are much harder to control and manipulate. Why does Warren keep it a secret? The answer is that the stock market is more easily influenced by large funds buying or selling of a particular stock.

The number of shares for a particular stock is relatively small when compared to the currency of a country. The incredible size of the Forex market insulates it from the power of large investors or funds to sway the market. We have listed several reasons why we think Forex trading offers an advantage over trading stocks. Hopefully some of these explanations will motivate you to look into currency trading.

Many investors supplement their stock holdings with positions in the Forex Market. Others decide to make a career out of Forex trading and forego stocks completely. No matter how you decide to incorporate currency trading into your portfolio, hopefully you now know how advantageous it can be.

Pips, Lots, and Leverage. This means you can hold a trade overnight in the Forex market without worrying about a huge gap in the morning, which can and does happen in the stock market. It can easily turn into long nights of staring at your screen watching every tick, biting your nails with anxiety. This is because the eight major currency pairs account for the majority of market volume.

This is compared to the more than 2, listings on the NYSE alone! This allows traders to focus on fewer trading instruments while still providing plenty of trade setups. When comparing Forex vs stocks , the volume traded in the Forex market is substantially higher than that of the stock market.

However, this does mean that the bid-ask spread will tend to be lower in the Forex market than the stock market. This is critical especially as your position size increases. Being able to get in and out of the Forex market without worry is a huge advantage over the stock market.

Take a look at the image above to get a feel for the massive discrepancy in liquidity between the Forex market and stock market. Yet another disparity between Forex vs stocks where Forex takes the day. The volume in each market is moving to opposite ends of the spectrum.