There are many advantages to forex trading as compared to the stock market. However, beware that some of these advantages can be a double edged sword if you are not careful or don’t have the knowledge to take proper advantange of them while at the same time guarding against losses.
1. Market Open 24 hours a day.
You can conduct business twenty-four hours a day with forex. Stock market traders on the other hand have a limited time when they can trade. This “perpetual open market” is very handy for people who are just starting out trading forex. Stocks force you to trade only when the stock markets are open, but with forex you can schedule your trading whenever it is convenient for you.
2. Margin = Leverage.
The ability to trade on margin gives forex traders significant leverage in their trading and offers the potential to make extraordinary profits with relatively small investments. For example, with a broker that allows margin of 100:1 you can purchase $100,000 in currency with only a $1,000 deposit. Of course, leverage goes both ways and can lead to large losses if you are not careful.
3. Liquidity and Trade Execution Time.
You are trading in cash when trading forex. Stock markets on the other hand require an active seller of a particular stock. There’s no investment more liquid than cash, so forex trades are executed near instantaneously. There’s no sitting around waiting for your trade to execute.
4. Market Not Easily Influenced by Individuals.
The foreign exchange market is so incredibly huge that no one individual, fund, bank, or government entity can influence it for long. This is the opposite of the stock market where one negative appraisal of a company’s stock could send it into a tailspin.
5. Only a Few Major Currencies to Follow vs Thousands of Stocks.
There are only seven major currencies to follow when trading forex. Stock markets on the other hand have thousands of stocks available to trade not to mention new IPOs to evaluate on a regular basis. Following them all is all but impossible. With forex you can devote a lot more time to each of the seven major currencies. Some traders specialize in just 3 or 4 currencies and narrow their focus even further.
6. No Bear Markets.
you are trading to predict the direction of currencies either up or down with forex. Stocks on the other hand can experience long bear markets where seemingly everything is going down. Trading forex currency pairs is by definition an activity where you are predicting which currency will be going up and which one will be going down with every single trade. All you need to do to succeed is predict correctly, not always as easy as it sounds!
To help you get the professional knowledge you will need to succeed in forex, here are a few excellent forex training options to get you on to a firm footing trading forex:
Recent Topics In Our Forex Trading Forum
hey everyone by JeremihUX
January 03, 2014, 06:22:42 pm
Help me by tradingmarket
August 18, 2013, 02:17:46 pm
You can read articles on my website about trading in financial markets. I'm sure it'll help you out http://www.tradingmarketonli...
Forex Trading. My 3 Year Journey. by tradingmarket
August 16, 2013, 12:51:43 pm
Interesting post. I agree that stop-losses should not be small but I'm not sure they should be that wide. 100 pips looks just fi...
AAAfx broker with zulutrade by Earnwhite
June 03, 2013, 12:10:48 pm
What traders are you guys following at the moment? Any good ones? I've not had the best success of recent in my own trading an...
Eur/Usd Daily by tradingmarket
April 12, 2013, 07:07:45 am
My latest outlook on eur/usd daily chart