Sunday, 12 June 2016

Why Forex is better than stocks?


Currency trading or you can say foreign exchange has been influenced by many external factors, including the action of central banks and other political moves as well. In order to answer the above question, it is very important for you to understand how do currency converter, banks, investors and brokers as well work?
It doesn’t matter if you see a lot of things in common because Forex and stock markets have a lot of things in common but you use similar chart and trading strategies.

Before you go and understand why Forex trading is better than stocks, better to know the working hours of both. Currency trading or Forex trading is open 24/7, whereas stock in some foreign countries open and close at regular working hours. So this is a reason to switch on to Forex trading because in stocks you need to close all your positions before stock exchange closes, if you trade Intraday or do day Forex trading. And if you want to know more, stocks represent only single of some baskets of companies, whereas in Forex market currency pair represent the entire economy of the country.
For example, EUR/USD currency pair represents the complete European Vs complete US economy. So you can understand it simply means that any economic event happening in the European country or in the US states will influence the price.
And to decide which is better either Forex trading or stock only if you want to trade Forex Vs Stocks then choose what you want in trading because the quality stocks are always safe, but give you smaller returns, or on the other hand Forex is highly risky and provides you great opportunities to earn a lot.

Leverage and Exchange Rate

If you are here in the United States, then you are allowed to trade with leverage 1:2 while in the Forex trade scene is totally different. If you want to qualify trade with leverage, you just have to open a Forex trading account and you are all set to go.
Only in United States you are bound to the leverage 1:50 while outside the country you can get as much as you can 1:200 leverage for your trading. Now, if you want to know a major difference why Forex is better than stocks, then read ahead and you know it yourself.
In stocks, you purchase and sell out shares of a company that may cost anywhere from one dollar to a thousand dollars. But you can hold a limited number of stocks and you need to concern with the ability of the company to make money.
While currency exchange is totally a different world, supply of currency may fluctuate and the good news is you can buy any amount of currency you want.
And currency trading is always quoted in pairs, so you need to consider the economy of the both countries. So if you want real fun and money too, then go to Forex.

Options you can choose

You can choose any of these two, either stocks or Forex but the right option would depend upon your system and currency trading strategies. But when you are starting with Forex trade then-
§         It is completely decentralized
§         Its participants are from all over the world
§         It has unique roles of large banks, hedge funds, and commercial companies as well.

Reason you should care about Liquidity

If you are new to this market, then you should be aware of liquidity because liquidity makes it easier to trade an instrument.
And in general, it simply means if superior the liquidity, then tighter spreads and lower transaction costs. For big companies like Microsoft, Apple and other may have more liquidity and commission shares to the broker may be more.
There is not any commission while you work with a Forex broker because when you trade with currency pairs and most common type of retail Forex trading is on a spread basis with not any commission. And with the currency pair EUR/USD you can trade at 1.1190, which is round trip transaction of 0.000/1.1190 and if you want to know about percentage then it is near about 0.01%.

24/7 Forex Trading and Major Currency Pairs

Time is the best part of Forex trading and in the Forex market; you can earn millions with following currency pairs. To gain something, you have to lose something that is why you have to spend some of your precious time to understand the world’s economy, the financial health of the countries whatever pair you are using as part of your trade.
But the most beneficial currency from which you can start are from Euro, Bitcoins, and Canadian dollars to US dollars and must understand the exchange rate of these currencies. Some of the primary or major currency pairs are listed below:
§         EUR/USD
§         GBP/USD
§         USD/CHF
§         USD/CAD
§         USD/JPY
To learn more about the major currency pair, read the article Major Currency Pairs in Foreign Exchange Trading

Have you decided yet whether Forex or the stock is good for you?

If not, then don’t worry, we have a lot for you to read and learn from. You will be glad to know that in currency trading or currency conversion, the bottom line has always stuck to it what works for you.
And follow some super successful secrets of great Forex traders of all time, because you need to know more about one market than another or you can say that people must stay in their area of expertise. But if you are interested in particular companies then you should invest in stocks, while if your mindset is for macroeconomics then Forex would be a successful business for you.
If you don’t have an interest in particular inclination, but good at transaction costs- Currency trade would be a better option.

Analyst

If you are a good analyst and update yourself with the world economy, then foreign exchange is better than stock for you because it is a prime market that can generate billions in revenue for the big banks and companies as well.
A good analyst in foreign exchange puts a little effect on exchange rate, yes, you just analyze the Forex market nothing else.

Future with Forex trading

Same as the Forex has an advantage over stocks; it has advantage over future market as well. And you would be facing guaranteed and limited risk and Forex traders can have positions limits for the purpose of risk management.
This number is considered relative to the money in the currency trader’s account.
But the risk is managed to be minimum in spot Forex market because of the online limits of trading surface and this will generate a margin call if the required margin value exceeds.

Your Choice and Your Profit

We are guiding you through some common terms and strategies so you can understand and make a lot of money using Forex market hierarchy. This hierarchy starts from major banks, EBS i.e. Electronic Brokering Services and then medium size and Small Banks, Retail ECNS, Retail Market makers or Hedge funds or commercial Companies and finally retail traders. This would be your choice and you can see the difference which will definitely help you to decide why Forex is better than stocks.

Choose the right for you
Stock
Forex
Minimum or No Commission
NO
Yes
24/5 Trading time
NO
Yes
Instant execution of the market orders
NO
Yes
No middlemen
NO
Yes
No market manipulation
NO
Yes

How you can invest AND manage the Costs

Most Forex traders and brokers work without commission, and there are not any single expensive fees or data licenses. The cost you pay during trading is the spread between the buy and sell price, which is generally displayed on your screen as it is. This is quite different than trading other markets and especially in stock. When trading equities or a futures contract, you often have to pay the spread along with a commission to a broker while not including any data charges for a price stream and charting according to the market!

Currency Trading Decisions

Lastly, it is important to mention that Forex trading moves around top 8 major currencies. This keeps the time and tide low while you analyze, when you are looking for a currency trade!  Companies on list of NYSE (New York Stock Exchange) are unavoidable to notice. Even if you have a basic opinion of the market, this can complicate the task of getting success in just one stock to trade.
Your profit would come out from technical analysis in Forex trading while in stocks it is difficult to analyze the chart daily and the risk depends on you and your strategy over which your system works. So friends finally you will find many similarities and dissimilarities between stocks and Forex trading and you know it well that just buy and hold doesn’t assure you any profit. So it is totally up to you where you would find you interest and invest but Forex market reacts instantly on news and along with that provides you a lot of opportunities. So you yourself decide the currency trading decision. 
If you are a new trader then start learning Forex trading and if you are an experienced trader then you know the benefits of Forex better.
Please share your valuable views in the form of comments. We appreciate your kind feedback.
Copyright © 2016, Sanaullah Baloch
All Rights Reserved.

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