Why Trade Forex: Forex vs. Stocks

Why Trade Forex: Forex vs. Stocks Lesson No 26

Assume you’re in a massive market, the New York Stock Exchange. There are about 2,400 different stocks for sale there. There are nearly 3,900 stocks on the NASDAQ market as well! That’s a lot of companies, right?

Now consider keeping track of all those stocks and picking which ones to trade. It would require a lot of time and work, right?

Now, let us discuss the FX market. We deal with only seven major currency pairings rather than thousands of equities. It’s much easier to keep an eye on!

Let’s compare it to a little competition: Mr. Forex and Mr. Stock. Mr. Forex is calm and collected, while Mr. Stocks does not stand a chance!

This is only one of the reasons why the FX market outperforms the stock market. There are other solid reasons:

24-Hour Market

Now, let’s discuss time in the trading business. The stock market operates under regulated hours. In the United States, it opens at 9:30 a.m. EST and closes at 4:00 p.m. That’s it; trading occurs only during those hours.

However, in the forex market, the situation is very different. It’s like a party that never stops! Most forex brokers are open from Sunday at 5:00 p.m. EST through Friday at 5:00 p.m. And, guess what? Customer service is usually available 24/7 as well.

This implies you’re not limited to a single time zone. You can trade whenever it suits you. Whether it’s the US, Asian, or European market hours, you get to choose when

Minimal or No Commissions

Now let’s talk about the expense of trading. You may have heard about Robinhood, which is making waves with their zero commission stock trading platform. So, guess what? Commissions are becoming less typical as more online stock brokers follow suit.

Now, onto the FX market. Here’s the best part, most forex brokers do not charge commissions or additional costs when you trade currencies. It’s a basic transaction, whether done online or over the phone.

Why? They make money via something called the bid/ask spread. It’s like a minor cost is incorporated into the trade. And the best part? It’s tight, constant, and fully transparent. Simply said, forex trading is less expensive than trading in other markets.

Higher Trading Volume and Liquidity

Okay, let’s speak about the massive size of these marketplaces. The forex market is like an experienced winner, with an average daily turnover of .5 Trillion. Yes, you heard that correctly: trillion with a “T.”

When compared to the stock market, it’s like making a big deal out of nothing. The stock market turnover is only a fraction of this enormous sum.

So, when we say the forex market is massive, we mean it.

Short-Selling without an Uptick

Now, let’s discuss something interesting, short selling. In the forex market, there is no holding back. Unlike the stock market, you can go short whenever you choose.

Here’s the cool part, forex trading offers opportunities whether the market is rising, falling, or performing the way it usually does. Whether you’re betting on the market growing (going long) or decreasing (going short), there’s always an opportunity to make a move.

Why? Because forex trading always involves two steps, buying one currency and selling another. This means there is no tendency for the market to rise or fall. You can trade in either direction.

Minimal Market Manipulation

Now let’s understand who controls these marketplaces. You’ve probably heard a lot about large funds making moves in the stock market. They have significant influence over prices.

However, in the forex market, the situation is rather different. The market is so large that it’s like trying to control an ocean with a single boat. The chances of one major party owning a currency are extremely low. Why? Because the forex market is extremely liquid, particularly during peak currency trading hours.

Who’s in the game? Banks, hedge funds, governments, and everyday people like us. The forex market’s size and liquidity make it practically impossible for any single trader to have a major impact.

Analysts and brokerage firms are less likely to influence the market

Now, let’s go into something you may have seen on television. Have you heard of internet stocks and big trading analysts being charged with giving the seal of approval while the stock is actually declining? It’s almost as if the story never ends.

Here’s the deal, in the stock market, there’s a delicate balance between companies going public and brokerage firms.They profit from each other. Analysts, the people who analyse these items, work for trading companies. It’s similar to a circle, they rely on one another.

Let’s focus on foreign exchange, also known as Forex. This is the market’s powerful, a true game changer. It’s more than simply a market; it’s the world’s money making machine, and guess who the major players are. Banks from all corners of the world.

Think of Forex traders as investigators. Their task is to research the forex market, discovering its secrets and trends. But here’s the catch, they’re not in charge of exchange rates. They cannot wave a magic wand and make the numbers dance. Instead, they perform a more observational role, keeping an eye on how the market reacts.

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Consider the forex market to be a busy city, with experts acting as keen-eyed those watching, observing how things grow. They can tell you what is going on, but they cannot dictate the script.

As a result, while they lose the capacity to directly influence exchange rates, their insights serve as essential for understanding the market and making sound decisions.

Let’s now discuss the struggle of the greats: Forex versus Stocks. So far, Mr. Forex appears to be winning his battle versus Mr. Stocks. Mr. Forex has won effectively, according to the scoreboard!

Now, the key question: will Mr. Forex defeat Mr. Futures 2-0? Stay tuned!

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