Why Forex Trading Instead of Stocks? You’ve probably asked yourself this question whenever you wanted to invest your money in the markets. The foreign exchange industry is one of the biggest financial markets in the world. Unlike stock markets, forex markets have no exact tangible location.
At first, forex trading was only available to the hedge funds, which meant that it was not open to any retail trader. However, over the years, technological advancements have made forex trading available to normal investors and retailers. On the other hand, Stock trading has always been readily available for traders even before foreign exchange came into existence. In this article, well discuss why you should trade currency on the foreign exchange market instead of trading stocks.
- Number of Trading options
The core reason why forex trading is better than stock market trading is the number of options one can invest in. Forex exchange has very few options to invest in, which means that there are very few key players that determine the market and exchange rates. Forex exchange is also less prone to sudden swings compared to stock trading.
- 24-hour market
The foreign exchange market is always open for business. This is a huge advantage for new investors and investors who like trading during their spare time. With forex trading, you don’t have to adjust your schedule to create spare time for trading. Rather, you can decide to trade whenever you feel like, even if its 2 am in the morning.
- Low transaction costs
Forex trading has no hidden charges. Instead, all the fees are included in the trade or the spread.
- Leverage and margin
Since forex traders trade on margin, they have significant leverage in their trading. Significant leverage means that you can make extraordinary profits from reasonably small investments. However, one needs to use these leverages carefully since they can cause as much harm as profit
- Fast trade execution and High liquidity
Forex trading is done in cash, and no investment ’s more liquid than cash. In forex trading, trades are performed instantaneously. You won’t have to sit around waiting for your trade to execute.
- Not easily swayed
The foreign exchange market is so large to be easily influenced by any individual, bank, broker, Ngo, fund, or government entity. This is not the case with the stock market where any negative appraisal by a statistician or analyst can significantly hurt all the investors.
- Small sample to Monitor
With forex trading, one has only seven major currencies to monitor, compared to the thousands of companies and stocks one has to watch out for in the traditional stock market trading. This means that you have more time to focus on just those exchanges you trade in. Most successful forex traders don’t even trade in all the seven; they only focus on two, three or four currencies. Narrowing your focus can really improve your focus and decision making. If done correctly with lots of patience, this will increase your success remarkably.
- No bear/ bull markets
Since you can trade in short or long intervals in forex trading, you will still make money irrespective of whether prices drop or rise, as long as you predict correctly. Because of this, forex trading gives the user more control over his decision than in the stock market, where the market is very unpredictable in most cases.
To trade in forex, someone needs a trusted broker to open account like Forex.com – in fact, several successful individual traders have consistently made profits from online foreign exchange via broker. Most of these traders will tell you that the key to success in forex trading lies in the ability to correctly interpret statistics and data in the market, and use the findings to exploit the market for profit. Forex trading also has software that truly levels the playing field, thus giving individual trader’s an advantage in the currency trading market place.
In summary, Forex Trading has a wide range of investments compared to the stock market. This makes it easily manageable and predictable, compared to managing and predicting stocks. The ability to predict market swings and making correct decisions is the key to success in any type of investment. In actuality, forex trading is far more advantageous than trading with stocks, especially in this economy.