Tag Archives: Forex Market

Forex vs Stocks – Which is better & Bigger?

Forex or Stocks

New York stock exchange has listed approximately 4, 500 stocks. On the other hand, NASDQ has an additional  3,500 stocks listed. Now, the question is. Which one should you trade? With so many companies listed on stock exchange, do you think you can make on top?

Forex vs Stocks

There are lots of currencies traded in spot currency trading, but many investors and market players trade the four major pairs. Isn’t it much easier for you  to keep few stocks rather than hundreds or thousands? In short, 4 pairs are much easier to keep an eye on compared to 100 or 1000 of stocks.

That’s just one of the benefits and advantages of the forex market compared to what stock markets have. Now, let’s take a look at some more advantages of forex market.

Time: 24 Hour Forex Market

As discussed in the previous lesson, forex market is open 24 hours a day. Many forex brokers are open from Sunday at 4:00 PM EST until Friday at 4:00 PM EST. Along with this is the non-stop customer service which is also available 24 hours a day 7 days a week. One of your benefits as a market player is that, you can always customize your own trading schedule even during the US, Asian and European market trading hours. That’s how cool forex trading is.

No or Minimal Commissions

Worrying about the possible transaction fees online or over the phone? Most of the forex broker charge minimal or no commission to trade currencies over the phone or online. With the combination of the tight, consistent and fully transparent spread, forex trading costs are significantly lower compared to any other markets available. So how do these brokers get compensations? They usually get compensated for their services through the bid/ask spread.

Instant Execution of the Market Orders

Under normal market conditions, your trades are instantly executed. Usually, you will get the same price as the price shown when you execute your market order. In this case , you are able to execute directly off real-time streaming prices. That’s absolutely great. Right?

In this kind of scenarion, as a market player, you need to make sure that you understand the different terms and conditions. Many online brokers only guarantee stop, limit, and entry orders under normal market conditions. So, you need to bare that in mind. Another thing, you need to understand that fills are instantaneous most of the time. Thus, under extraordinary volatile market, order execution may experience delays.

Short-Selling Without an Uptick

Worrying about restrictions on short selling? Worry no more. Unlike the equity market, short selling in the currency market has no restrictions. Therefore, trading opportunities exist in the currency market regardless of whether a trade is long or short. They also exist whichever way the market is moving. Trading always involves buying and selling one currency and another, thus structural bias to the market does not exist. This is one of the advantages of trade and forex market.  You always have equal access to trade in a rising or falling market.

No Middlemen in Forex

A market player or a trader gets a lot of advantages from centralized exchanges, but the involvement  of middlemen is one of the problems in a centralized exchange. The presence of middlemen in between the trader and the buyer or seller of the security or instrument traded will const them money which can either be in time or in fees.

On the other hand, spot currency trading is decentralized. This only means that quotes can vary from different currency dealers. With this kind of competition among dealers, you are almost always assured that you’ll get the best deals because forex traders get quicker access and cheaper costs.

Buy & Sell Programs Don’t Control the Market

Do you know that the stock market is very susceptible to large fund buying & selling? This involves selling the X or buying the Z.

When it comes to spot trading, the huge size of the forex market makes the fund or bank controlling a certain currency very small. Among the participants in the spot currency markets where liquidity id unprecedented are banks, governments, retail currency conversion houses, hedge funds and large net worth individuals.

Analysts & Brokerage

Analysts and brokerage firms are less likely to influence the entire market. No one can ever control the market, whether its a big entity or a very rich person. “Buy” when the stock is rapidly declining is a very common thing. The government may step in and discourage this kind of relationship, but let’s accept it, it’s the nature of these relationships.

For the brokerage and companies that are going public, IPOs are considered to be big businesses. Analysts work for the brokerage houses that need the companies as clients. This is the reason why relationships are mutually beneficial. Always remember that the catch-22 will never get lost.

Foreign exchange is the ultimate market that generates billions and trillions of revenues for the world banks making it as a necessity of the global markets. In addition to this, Forex analysts have lesser effects on the exchange rates. Their main task is to analyze the forex market.

Verdict

Forex

It is clearly shown above that Forex has all the positive traits of a market. This means that Forex won over Stocks.

In the next lesson, let’s find out if Forex will still keep itself on top versus Futures.

For more information about forex, feel free to check our forex training videos.

Proceed to Forex vs. Futures

Back to Previous Lesson: Advantage of Forex

Advantages of Forex

Forex & Its Advantages

Forex Market

Trading forex has a lot of benefits and advantages. Here are some of the reasons why people choose to invest in this kind of market:

No Commissions

In the world of forex, there are no clearing fees, exchanges fees, government fees & brokerage fees. A lot of retail brokers are being compensated by the “bid-ask spread”for their services.

No Middlemen

Middlemen are not present in this market. Spot currency trading eradicates them allowing you to trade directly with the market responsible for the pricing on a particular currency pair.

No Fixed Lot Size

Lot or contract sizes are determined by the exchanges when we talk about future markets. Let’s take for example the silver futures. Silver futures’s standard-size contract is 5,000 ounces. On the other hand, in spot forex, you determines your own lot or position size. With this kind of strategy, spot forex allows traders to participate with accounts as as $25.

Low Transaction Costs

Under normal market conditions, the retail transaction cost or the “bid-ask spread” is typically less than 0.1%. On the other hand, larger dealers may have the spread for as low as 0.07%. Take note that leverage always an important role in this process.

24-Hour Forex Market

Don’t worry about the opening times of Forex Market. It’s open 24 hours a day from the Monday morning in Australia to the afternoon close in New York. This only means that forex market never sleeps. This will allow you to trade in the morning, noon, night, during your breakfast or even while your sleeping. Now, when is the best time to trade? We’ll find out in the coming lessons.

No One Can Corner the Market

You already know how big forex market is, right? Therefore, no one can corner or control the market price for an extended period of time because of the large number of participants trading every single second, minute or hour of the day.

Leverage

In the world of forex trading, a small deposit can control a huge total contract value. Leverage plays an important role in forex trading. It provides the trader the ability to generate acceptable profits, and at the same time keeping the risk capital to a minimum.

However, you have to remember that leverage has a double-edged sword capability. If you don’t comply with the proper risk management, then this high degree of leverage can lead to large losses and gains as well.

High Liquidity

Forex market is huge because of the large numbers of participants. This is the reason why it’s liquid. It is indeed extremely liquid. In a more clearer point, this only means that under normal market conditions, with a single click of your mouse, you can instantly buy and sell at will. Expect that there will usually be someone in the market who’s willing to take the other side of your trade. Don’t worry. You will never stuck in a trade. Remember that you can control your online trading platform, which allows you to automatically close your position once you’ve reached your desired profit level, and/or you can also close a trade if it’s going against you.

Low Barriers to Entry

I am pretty sure that you are thinking about the cost of currency trading. You would think that it costs a lot of money. In fact, it’s certainly low compared to trading stocks, options or futures. It’s good to know that there are many online forex brokers who offer “mini” or “micro” trading accounts for as low as $25 minimum account deposit.

With this kind of amount, you can definitely start trading forex. This make forex trading accessible to individuals who belong to low-to-middle income families. It may not be a big start, but it will surely give you the chance to experience trading.

Free Stuff Everywhere!

A lot of forex brokers online offer “demo” accounts to give you a taste of the basics, practice trading techniques and strategies. This will allow you to hone you skills towards better forex trading.

Don’t worry, “forex demo accounts” are absolutely free!

Demo accounts are very valuable indeed. These accounts will not only allow you to save money but will certainly give you an opportunity to try trading using “play money” before getting and opening a live trading account. This time, you need to risk real money.

After learning and understanding the advantages of the forex market, it’s now time to compare forex market with the stock market!

Proceed to the next lesson. Forex vs. Stocks

Why Trade Forex?

Forex Market – Why do Traders Love Them

There are many reasons why they love the Forex. Let us discuss them one by one.

In the next chapters, you will be able to know why traders love Forex. Knowing them  allows you to understand Forex, stocks and its advantages. Learning these important lessons will give you the chance to be successful in the world of Forex Market, stocks and exchange.

Forex Market

Why Trade Forex Market Lessons

Advantages of Forex Market

– This includes low transaction costs & high liquidity

Forex vs. Stocks

– Which is bigger, Forex or Stocks? No one or nobody can corner the forex market even the largest financial institute. 

Forex vs. Futures

– How does futures market trade work compared with the Forex Market? As we all know, the futures market trades a shrimpy amount of $30 billion per day. That’s $30 billion. Sounds huge isn’t it? Well, that’s nothing compared to the FOUR TRILLION that is traded in the FOREX MARKET everyday.