Forex Stocks Comparison: Best 5 Reasons For Choosing Forex
Powered by Max Banner Ads
Forex stock comparisons all over the internet are going to show the advantages of choosing to trade forex. Of course if you are looking for long term investment then that is another matter, but for speculative traders the forex has many special features that make it particularly attractive. Here are the top 5 reasons for choosing forex trading over stock trading.
1. 24 Hour Market
One practical advantage of the forex market is that it is open for trading 24 hours a day Monday through Friday. This is because of the global nature of the market and the fact that it is always business hours somewhere in the world, excluding weekends and holidays. So a forex trader can work a day job and trade in the evenings or early mornings.
2. Liquidity
Currency is liquid by definition, if liquidity measures the ease of converting an asset into cash. More often it is taken as the amount of money in a market. On this, too, currency scores very high.
Turnover in the forex market was almost $4 trillion per day on average according to a survey by the Bank For International Settlements in December of 2007. It has probably exceeded that now.
This is considerably more than is traded on all of the stock markets in the world added together. In forex you are not limited to trading in your own country or on your own country’s currency, so the advantage to this trader of being part of this huge market is clear. You have a much better chance of getting the price that you see or the price that you want.
3. Openness
Another advantage stemming from the sheer amount of money in this market and its high trading volume, is the openness of the market. There is very little opportunity for insider trading in a market which deals with the economic performance of whole nations and involves every major financial institution in the world. This means that the retail trader is not at a disadvantage to the extent that might be true in the stock market and lends more weight to our forex stock argument.
4. Leverage
Leverage is the trader’s most essential tool in that it allows a small fund to control a large position size, resulting in a massive proportional return on investment, assuming that you are profitable. The leverage offered by forex brokers tends to be higher than in stock trading.
In forex, 100 times leverage is seen as standard or low, 200 times is common and 400 is possible in some circumstances. Of course this makes forex trading extremely risky but for a successful trader it is a significant advantage because it means that more money can be made from less.
5. Trade Both Directions
When you trade forex, you are always dealing with a currency pair, exchanging one currency for another. This means that you can trade in both directions. For example if you are trading EUR/USD, you can start by investing in either euros or US dollars depending on which one you think will rise. So you can buy or sell the pair (go long or go short).
In a sense this is like trading stock options or futures, but with more flexibility. The flexibility comes from the fact that currency values are relative to each other. They can never all fall at the same time, as stocks can. So this is another point for forex in the forex stock comparison.
Forex Stock Comparison Article Source:http://www.articlesbase.com/finance-articles/forex-stocks-comparison-best-5-reasons-for-choosing-forex-1774006.html
- James Roshwood writes about Forex and welcomes new visitors to his excellent Forex Blog – GreatForexWorld.com by giving them a cool free forex gift. To get your free tips regarding forex trading and to visit the blog at Great Forex World just click on this link ==> Get Free Forex eBook
