Forex Vs Stocks II: Which Is Best For You?
Many stock traders are now looking at forex vs stocks, wondering if it might be worth making a move or at least increasing their range so that they begin to trade both. Even successful stock traders should consider diversifying and stock traders who are struggling may benefit greatly from making the switch. Here we compare forex vs stocks and consider some of the advantages of forex trading.
Two Way Market
When you are trading stocks, you are limited to buying a stock that you think will rise and then selling it. Forex, however, is always an exchange: in order to buy one currency you must simultaneously sell another. You cannot buy US dollars with US dollars. So you are always dealing in a currency pair, and this means that you can open a trade in either direction. As with stocks you can buy the pair (in fact, buy the base currency) if you think that the value of the base currency relative to the quote currency will rise, but you can also do it the other way around. That is, you can begin by selling the pair (selling the base currency to buy the quote currency) if you think that its value will fall.
Trading Hours
Trading opens on Monday morning in Australia (Sunday evening US time) and does not close until Friday afternoon in the USA. So forex is a 24 hour market, five days a week. This can be advantageous for anybody who needs to trade outside of normal business hours in their own country. While speculative stock trading is difficult if you cannot access the internet during the day, you can always trade in currency in the evening.
Smaller Account Balance And Higher Leverage
Forex brokers will routinely allow leverage of 200:1 or even more, so you can control a much larger position with a smaller account balance. This also gives forex brokers an opportunity to allow traders to begin with a lower investment. While a regular forex account usually carries a minimum investment of $10,000 or more like a stock broker account, it is possible to open a mini forex account with just a few hundred dollars. So traders can get started for a very low investment.
The forex market is getting so much airtime that it is worth investigating for all retail stock traders. Open up a demo forex trading account so that you can test out your systems on the forex market without risk and look into forex vs stocks for yourself.
