Benefits of Forex Trading over Stock Trading
The foreign exchange, or Forex, market is the largest and most widely traded market in the world. Because of this, there are many benefits of forex trading over stock trading. It offers 24 hour trading throughout the working week. While there are dozens of currency pairs that can be traded, most of the market is concentrated on the four major pairs. This means that the trader doesn’t have to meticulously study thousands of companies and read hundreds of press releases every day. A forex trader can open and close trades easily, while benefiting from tight spreads and minimal or no commission. Try going to your stock broker and asking for no commission trades!
Benefits of Forex Trading over Stock Trading – Top 3 Benefits
- State-of-the-art trading platforms – There are many benefits to Forex trading through a trading platform like OANDA. Because forex is global, the software to conduct trades is as robust as it comes. This software of platform offers state-of-the art charts, graphs, and exceptional execution.
- Volume, volume, volume – The volume of trades conducted every day is arguably the biggest benefit of Forex trading. It is this volume that gives the market the level of liquidity that traders benefit from. Whatever currency pair you are looking to trade, and however large your proposed trade, you will be able to open or close that trade. When trading stocks, this isn’t always the case. Even if you are looking to buy or sell some of the most popular stocks, you may have to wait and potentially lose out on profit or endure further losses before your transaction can go through.
- Market size – The size of the market also means that any single trade is unlikely to yield positive or negative effect on the overall market conditions. Fund managers, who invest billions of pounds in stocks, can drive prices upwards and downwards according to whether they buy or sell in a specific company. The sheer size of the Forex market means that no single trade can have this effect. For normal folks like you and me, this can be less of a concern as we aren’t risking millions at any one time 🙂
Benefits of Forex Trading over Stock Trading – Around the Clock Trading
There are other great benefits of Forex trading over stock trading. As well as being liquid, Forex naturally means trading in a number of currencies which, in turn, means that trades occur at different times of the day. The trader can manage their trading schedule themselves, and it is even possible to open and close positions late at night or early in the morning before stock markets are even open.
Benefits of Forex Trading over Stock Trading – Final Thoughts
Specialization is possible in any market, but it is easier in a market that only has several dozen options and four main options, compared to a global stock market that has hundreds of thousands of options. This enables the trader to pay greater attention to the currencies and currency pairs that they trade, and this specialization can help to ensure greater results and larger profits.
Remember, forex trading is very high risk. This means that to receive the benefits of forex trading over stock trading, you have to be willing to lose a lot of money for a chance at a big payout. You need to have a very high risk tolerance and be trading with money that you can afford to lose. If you are willing to take the risk, the payouts can be quite large if you bet correctly. For those of us with a lower tolerance for risk, long term investing in market index funds (buy and hold) may be just what the doctor ordered.
I think one of the things you touched on is the biggest reason, but I also think you missed another important point.
Platforms, yup, that’s the main reason. There are so many really advanced, and importantly free platforms to use for analysis. Software such as Metatrader was breaking open doors that weren’t available to the average trader, and still today allows people with ideas, to put them into practice.
The main point I think you missed is that it is easier for most people to understand a currency and what affects it. There are (apart from economic data) not that many ways it can be manipulated on a large scale.
Stocks however, you have to factor in the sentiment towards a sector, you have to have a grasp on a companies fundamentals, and even have a beady eye on economic data and overall market conditions. Too many variables for the average brain.
Good point DaveS. Unless you are George Soros, when he in fact did manipulate currency on a grand scale! 🙂