|
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 200 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 $400,000 in currencies.
Trade mini contracts for as little as $250
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
|