Foreign exchange and stock comparisons all over the web are going to show the benefits of selecting to trade in forex. Of course if you are hunting for long-term investment then that’s another thing, except for speculative traders the forex has many special features that make it particularly attractive. Here are the top 5 reasons for choosing foreign exchange trading over stock trading.
1. 24 Hour Market
One practical merit of the forex market is that it is open for trading twenty-four hours a day Monday thru Fri.. This is because of the worldwide nature of the market and the proven 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 simplicity of converting an asset into money. More frequently it is taken as the quantity of money in a market. On this, too, currency scores very high.
Turnover in the forex market was almost $4 trillion every day on average according to a survey by the Bank For international Settlements in December of 2007. It has potentially exceeded that now.
This is significantly more than is traded on all of the stock exchanges in the world added together. In forex you are not limited to trading in your own country or on your own nation’s currency, so the advantage to this trader of being an element of this large market is clear. You have got a much better chance of getting the price that you see or the price that you need.
3. Openness
an additional benefit deriving from the sheer sum of money in this market and its high trading volume, is the openness of the market. There is very little opportunity for illegal trading in a market which deals with the industrial performance of full countries and involves each major financial establishment in the world. This means that the retail trader is not at a disadvantage to the limit that might be true in the exchange and lends more weight to our currency exchange stock discussion.
4. Leverage
Leverage is the trader’s most essential tool in that it allows a tiny fund to manipulate a large position size, resulting in a big proportional return on investment, assuming that you are lucrative. The leverage offered by forex brokers is higher than in stock trading.
In currency exchange, 100 times leverage is seen as standard or low, two hundred times is common and 400 is possible in some circumstances. Naturally this makes forex trading very risky but for a successful trader it is a significant advantage because it implies more money can be made of less.
5. Trade Both Directions
When you trade foreign exchange, 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 making an investment in either EU Bucks or US greenbacks depending on which one you suspect will rise. So you can sell or buy the pair ( go long or go short ).
In a way this is like trading stock options or futures, but with more pliability. The adaptability comes from the indisputable 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 foreign exchange in the foreign exchange stock comparison.
