Mar
Currency exchange and stock comparisons all over the Internet are going to show the advantages of choosing to trade in forex. Of course if you are searching for long-term investment then that’s another matter, but for hopeful traders the foreign exchange has many special features that make it particularly tasty. Here are the top 5 reasons for choosing foreign exchange trading over stock trading.
1. 24 Hour Market
One practical benefit of the forex market is that it is open for trading twenty-four hours a day Monday through friday. This is as of the worldwide nature of the market and the proven fact that it is always business hours somewhere in the world, excluding weekends and vacations. So a forex trader can work a real job and trade in the evenings or early mornings.
2. Liquidity
Currency is liquid unarguably, if liquidity measures the ease of changing an asset into cash. More often it is taken as the quantity of money in a market. On this, too, currency scores really high.
Turnover in the currency 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 the stock markets in the world added together. In currency exchange you aren’t limited to trading in your own country or on your own country’s currency, so the benefit to this trader of being part of this large market is clear. You have a much better chance of getting the price that you see or the price that you want.
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’s very small opportunity for insider dealing in a market which deals with the commercial performance of entire nations and involves every major financial establishment in the world. This means that the retail trader isn’t off balance to the extent that might be true in the stock market and lends more weight to our currency exchange stock debate.
4. Leverage
Leverage is the trader’s most essential tool in that it permits a tiny fund to govern a large position size, leading to a massive proportional return on investment, assuming that you are profitable. The leverage offered by forex brokers is higher than in stock trading.
In foreign exchange, a hundred times leverage is seen as standard or low, two hundred times is common and four hundred is possible in some circumstances. Of course this makes foreign exchange trading extremely risky but for a successful trader it is a serious advantage because it means more money can be made from less.
5. Trade Both Directions
When you trade currency exchange, you are always dealing with a currency pair, exchanging one currency for another. This means that you can trade in both directions. For instance 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 believe 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 flexibility. The flexibleness comes from the proven fact that currency values are relative to one another. 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.
Tags: currency trading, Finance, foreign exchange, forex, forex trading, Investing, money, stock trading, stocks, traders, trading