Why Trade Forex: Forex vs. Stocks

Trading stocks requires half of the stocks’ value or 50% to be put up as collateral for trading, while trading in the forex market requires only a small fraction of the notional value of the currency to be put up as margin because the trade is based on a rate of exchange, rather than on a purchase.

Stock market indexes are a combination of similar stocks, which can be used as a benchmark for a particular portfolio or the broad market. Blue chips, on the other hand, are stocks from well-established and financially sound companies. Trading sessions for stocks are limited to exchange hours, generally 9: Fills are instantaneous most of the time, but under extraordinarily volatile market conditions, like during Martian attacks, order execution may experience delays. A range of products provide traders and investors broad market exposure through stock market indexes.

Forex Versus Blue Chips

W hether you should get involved in forex trading or stock trading depends on whether you fancy yourself Warren Buffet or George Soros. The famed value investor, Buffet, has earned a year annualized return of 20 percent buying and holding value stocks for his holding company Berkshire Hathaway.

However, one of the problems with any centralized exchange is the involvement of middlemen. Any party located in between the trader and the buyer or seller of the security or instrument traded will cost them money. The cost can be either in time or in fees. Spot currency trading, on the other hand, is decentralized, which means quotes can vary from different currency dealers.

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. Will it go for with Mr. The successful man will profit from his mistakes and try again in a different way. In this article, we'll compare investing in the forex market to buying into blue chips, indexes and industrials.

Many traders are attracted to the forex market because of its high liquidity, around-the-clock trading and the amount of leverage that is afforded to participants. Blue chips, on the other hand, are stocks from well-established and financially sound companies. This is a measure of short-term price fluctuations. While some traders, particularly short-term and day traders, rely on volatility in order to profit from quick price swings in the market, other traders are more comfortable with less volatile and less risky investments.

As such, many short-term traders are attracted to the forex markets, while buy-and-hold investors may prefer the stability offered by blue chips. A second consideration is leverage. In the United States, investors generally have access to 2: The forex market offers a substantially higher leverage of up to Is all this leverage a good thing? Yet another consideration in choosing a trading instrument is the time period that each is traded.

Trading sessions for stocks are limited to exchange hours, generally 9: The forex market, on the other hand, remains active round-the-clock from 5 P. EST Sunday, through 5 P. The flexibility to trade during U. Stock market indexes are a combination of similar stocks, which can be used as a benchmark for a particular portfolio or the broad market. The indexes provide traders and investors with an important method of gauging the movement of the overall market.

A range of products provide traders and investors broad market exposure through stock market indexes. Stock index futures and e-mini index futures are other popular instruments based on the underlying indexes.

The e-minis boast strong liquidity and have become favorites among short-term traders because of favorable average daily price ranges. In addition, the contract size is much more affordable than the full-sized stock index futures contracts.