The stock market and the foreign exchange market are two extremely similar yet different markets. If you are trying to figure out which market is the best place for your time and money, you will want to know how they contrast and which aspects of these two financial realms will really appeal to you. After these few points, it will be easy to recognize that this decision is a no brainer.
24-Hour International Market!
The forex market does not play any games, nor does it need time to sleep. It is open for trade 24 hours a day, 7 days a week. You can jump on your computer at any time of the day to monitor the trends, or to see to and adjust your investments. Setting your own hours has a whole new meaning when dealing with forex trading, which is a huge plus if you are not a morning person. This is where the stock market lacks. The stock market is typically open 9:30 a.m. to 4:00 p.m. United States Eastern time, with the exception of holidays and weekends. This can end up being a huge pain, especially if you live anywhere in the world that isn’t the east coast of North America. The foreign exchange market never sleeps. There is always an opportunity to make money.
Absolutely No Commission!
If you’ve ever traded stocks you’ll know how frustrating commissions can get. You spend hours on end researching the best trading platforms and financial firms to open an account with, but then $6 – $12 trading commissions mark down your profits. Aside from the fact that paying extra for anything always stinks, if you are a novice trader commissions can be especially frustrating. You have to calculate your trades down to a tee to account for commission and at the end of the month any miscalculated trades can accumulate a ton in unnecessary commission costs.
No Central Governing Body!
For someone who’s interested in playing around in the financial marketplace, these are sweet words. Yes, you heard correctly: the forex market is a self-regulating market, bearing no written rules and regulations. If you have the information inferring a profitable trade, no matter the source, than by all means go ahead and follow that lead. Should your trade strike gold, you won’t ever be prosecuted. The rules and regulations of the forex market are not as rigorous as the stock market. You may hold any position, take any action and invest as much money as you would like.
Margin and Leverage
Currencies move at a rate much slower than that of the stock market. It is not very common for a currency pair to move more than 2% daily in the forex market. Whereas in stocks you will find quotes to the 100th decimal place, in the forex market you see that quotes are measured to the 10,000th decimal place (i.e. 0.9880 USD/CAD). Because of this slow rate of change, it is possible to leverage your transaction through your brokerage. The amount of margin varies, but it normally is somewhere between 50 and 200 times the original deposit. Leverage can make even the smallest of investments rewarding. For example, an offer of 100:1 leverage means that an account value of $1,000.00 would allow an investment of $100,000.00 in a currency pair. Leveraging gives an investor the opportunity to make large profits on minimal investments. It is important to note that magnification of the profits capable of being made applies similarly to losses.
Extremely Liquid and Very Easily Tracked
There is no more liquid a transaction than a transaction of currencies. Forex transactions are executed and processed immediately, as opposed to the stock market where you must wait for your brokerage to process your bid, find a buyer, and execute your trade. In addition to the liquidity of the forex market, the objects of speculation and trade are very easily tracked. There are only seven major currency pairs to follow, in contrast to the stock market’s thousands of stocks.
It goes without saying that the forex and stock markets are equally different as they are similar. Initially, the stock market seems larger and more popular than the forex market. But the fact of the matter is that the forex market is the largest financial market in the world, processing approximately $1.5 trillion daily. Meaning, if you can understand exactly how to manipulate this market, you will profit significantly more than in the stock market. Good luck, and good trading!
This guest post comes courtesy of the forex team at TopForexNews.com.