7 Reasons Why Forex Trading Beats Stock Trading
I find that forex trading is superior to stock trading. Although trading stocks and trading foreign currencies have similarities, they are actually quite different. In this article, I'll cover these major differences.
1. Forex markets are open across the globe 24 hours a day Monday - Friday. This allows you to trade forex actively during off hours which might better fit your schedule. Stock markets, at least in the USA, are open only from 9:30 am until 4pm each day. There is a lightly traded after hours market, but this would be a generally dangerous time to trade as individual stocks are more easily manipulated with the lighter trading volume.
2. You do not need a lot of money to start trading foreign currencies. Brokers now offer mini and even micro forex trading accounts where you can get started with a couple of hundred dollars.
3. The forex market is huge, many times larger than stock markets. It's not easy to manipulate. Even big banks are not able to manipulate currency markets easily. You are trading money. So there's no "going to cash" as you're already there. With such a huge market and no liquidity issues, you can always close a trade at a desired point. The best way to do this to use a trading "bot" or computer program.
4. No commissions and no fees. Trading stocks requires the payment of a commission to a stock broker. This will mean that you can't trade as often as you'd like if you have a small account. But with forex, there's no such limitation because there is no commission. Forex brokerages make a small amount on each transaction from the "spread", which is the difference between the "bid" and the "ask".
5. You can trade foreign currencies as often as you like, as you're not worried about brokerage commissions. There's no fixed lot size that you have to buy, but brokerage houses do have their own standard lot sizes. You can shop for brokers that offer small or fractional lot sizes.
6. High Leverage. You can often find brokers who may allow you to up to 200 times the size of your deposit. 100 times your deposit is more common. So with 100 times, you would only need $100 to control $10,000 in a trade. Most brokerages will close your transaction if your account balance is in danger of not being able to cover a loss on a trade. So, you can't lose more than you have in your trading account. You'll need to employ good risk management to insure that doesn't happen.
7. Low risk of manipulation. In the stock market, bigger traders and investors can control price movement of smaller stocks pretty much at will. I don't consider that the stock market is fair and balanced. Although nations do manipulate the value of their currencies, it's not something that happens with the frequency that it does in the stock market.