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Why Forex Is A Better Investment Idea Than Stocks or Commodities
Forex, the Foreign Exchange Market, is a worldwide market for buying and selling foreign currencies. The major currencies that are traded include the U.S. pound (USD), Euro (EUR), British Pound (GBP), Canadian pound (CAD), Australian pound (AUD), Japanese Yen (JPY), and the Swiss Franc (CHF). The purpose of this article is not to go into the details of how Forex works, but to compare the benefits of trading in the Forex market versus trading the Equity (American stocks) or Futures markets (Commodities).
The Forex market is the largest market in the world with over 2 trillion pounds traded every day. This compares to the 200 billion pounds traded daily in the Equity and Futures market each. Because of this, the Forex market benefits from fairer prices, price stability, and better trade execution.
Forex has the advantage of being open 24 hours a day. The Forex market opens on Sunday afternoon and remains open until it closes on Friday afternoon. The Equity and Futures markets are only open Monday through Friday 8:30 a.m. to 5:00 p.m. Eastern Standard Time. This gives Forex traders the opportunity to trade around their personal schedule. Also, liquidity in the Equity and Futures markets are reduced after regular trading hours.
When trading Forex, you will not incur the commissions or transaction fees that exist in the Equity and Futures markets. You pay a spread on the currency pair you are trading and costs are very low, especially when compared to the other markets.
Investment leverage in the Forex market can be as high as a 200:1 margin. In the Equity and Futures markets your average margin is 4:1. This means that you can control 10,000 worth of currency with only a 50-pound margin.
In the Equity and Futures markets, investors are expected to fund several thousand pounds to open a trading account. In the Forex market, you can open a mini account for only 300 pounds and begin trading.
In the Equity market, short selling is very risky and comes with limitations. In the Forex market, you are able to buy long or sell short any currency pair with no limitations or difference in risk.
As an investor in the Forex market, you are able to concentrate on only a few major currencies. There are seven major currencies yielding four major currency pairs that most Forex investors concentrate on. Whereas in the Equity market, investors have over 40,000 stocks to choose from when contemplating where to invest their money.
There are many factors to consider when deciding on which market you want to spend your time and money. The Forex market provides many benefits over the other major investment markets that will allow you, the investor, to make larger profits, take less risk, and spend more time with your personal life and less time investing.
Recently, investors commence sharing in the penny stocks. This action occurred especially after investors began to realize that they had the ability to invest chump change in a selection of companies. In short, investors could invest a few pennies or pounds in small companies around the United States. Since Forex and the stock market exchange industry has higher risks many newcomers to the stock market will invest in penny stocks.
Penny stocks allow investors to put up five bucks and potentially win 25. If the investors lost their money, so what, it was only a few pennies or pounds.
For the most part, it is simple to invest in penny stocks. Investors must open broker accounts online to get started. These accounts are compared to bank accounts. Brokers will charge small fees, which is subtracted from the account each time a holder invests in the stocks. These fees will cover basic account duties that the broker tends to.
Brokers do not give advice. These people invest in stock markets themselves. To get advice the investors must pay nominal fees for stock newsletters. The freebies will mislead investors, so experienced investors will avoid these offers. Most of the freebies will also direct investors’ right into scammer hands.
Paid newsletters are regulated by the law. You pay a few pennies to get the information. This is a great option if you intend to invest in penny stocks.
To find a broker visit the Internet. You will find quality services and other offers to help you learn about penny stocks. Read the paid newsletters so that you know what you are getting into. NEVER step in to stock market without being informed.
You will find plenty of stock articles online too. Use the articles as your guide to learn about stock markets. Be careful since some articles may mislead you just as the free newsletters will. Make sure you search for articles that include facts and evident links to verify statements, recommendations, et cetera.
When you are informed, you get the most of your stock experiences. If you are new to the stock market, start with the penny stocks first and then move to other types of stock marketing.
Forex stock market, (Foreign Stock Market Exchange) exchange and stock markets often request that you invest a large amount of cash to get started. Learn the ropes by starting out small and then moving to larger investments in stock markets after you feel confident that you know what you are doing.
Forex trading offers many advantages over the traditional stock market. I have already mentioned that forex trading offers the benefit of not having to pay commissions to a broker which prevents you from building up huge fee amounts. You can trade all day with the forex market because it operates 24 hours a day, and the market is much bigger then what the stock exchange is meaning there is always a buyer and a seller for whatever currency you want. In the rest of this article I am going to finish explaining the benefits and then you can determine if this kind of investment is right for you.
The uncertainty of stocks versus forex
Stocks are highly erratic things. They can move up and down at the drop of a whim, this is even truer if you have ever tried what is referred to as day trading. Day traders know first hand just how erratic the markets are. It is very hard to follow trends with the stock market because there is so much supposed insider information out there. With forex the market tends to follow trends more consistently.
You dont have to be so concerned about an erratic market. Most of the information is advertised to everyone at the same time so there is no supposed insider information when it comes to forex. You can build your whole strategy based on these trends.
There is much more leverage with forex
With forex trading you have a lot more leverage then what you would have if you were trading the regular stock market. With forex trading you have a leverage of about 100-1 where with stock trading your leverage is only about 2-1. This means you are able to control much more with less then what you could with stocks. To make this easier to understand just imagine that 1.00 can buy you 100.00 of whatever currency versus the same dollar being able to buy you only 2.00 of the same thing. Which one would you choose?
Operating costs
With the stock market you have to have a couple thousand dollars minimum to get involved. While some people may have the money to play with at this level others are not willing to take the risk. With forex trading you can open up different levels of accounts as low as 250.00. The lowest level is referred to as a micro account or a mini account, the higher level is referred to as a standard account. You can take money you can afford to lose to begin the learning curve.
As you can see there is much more advantage with trading forex then there is with stock market. You can get started with very little utilizing any one of the three different account levels. You can have more leverage with your money, and you can follow certain trends that have been proven over time to be consistent. So consider forex trading over trading traditional stocks if you want to take advantage of these benefits.
First of all, what is Forex? It is a short version of FOReign EXchange. It is also called FX and 4X, but regardless of the name you use, it is the largest financial market in the world. From 1997 to the end of 2000, daily Forex trading has skyrocketed from 5 billion to over 1.5 trillion..
Lets look at some reasons why Forex trading is rapidly gaining popularity over other markets.
Trading hours: The Forex market is traded 24 hours per day from about 7pm EST on Sunday until about 3pm EST on Friday. The stock market is only traded Monday thru Friday with limited hours.
Liquidity: Forex markets trade over 1.5 trillion each day while the stock market only around 200 billion. There are only 7 major currencies traded on the Forex while there are more than 40,000 stocks from which to choose.
Commissions: No commissions are charged on the Forex while the stock markets charge high commissions and transaction fees.
Leverage: Forex Market offers great leverage power. Brokers usually offer from 100:1 to 400:1 leverage. This means a trader using 100:1 leverage you control 100,000 with only 1,000 margin. Stock market investors pay full price for stock when purchased unless they have a margin account and the leverage with margin is usually only 2:1.
Low Minimum Investment: The minimum initial investment to open a Forex trading account is as low as 300. Most stock brokers require several thousand pounds as a minimum to open an account.
This is the perfect market. Foreign Exchange trading has long been recognized as a superior investment opportunity by major banks, multinational corporations and other institutions. Now the internet has propelled Forex trading among private individuals tremendously. Trade from home, the office, or virtually anywhere in the world. Trade virtually anytime day or night. Work part time or full time.
It is obvious that the Forex Market offers a substantial opportunity to those willing to invest energy, focus, and a little money.
It is difficult for a new Forex trader to become successful in the Forex market without understanding the basics and how it works. This knowledge can be obtained in a free Forex training program.