FOREX

Forex vs. Stocks

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Learn the advantages of Forex Exchange as to other markets.

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First of all, what is Forex?  It is a short version of FOReign

EXchange.

 

It is also called FX and 4X, but regardless of  the name you use, it is the largest financial market in the world.

 

From 1997 to the end of 2000, daily Forex trading has skyrocketed from $5 billion to over $1.5 trillion..  

Let’s look at some reasons why Forex trading is rapidly gaining popularity over other markets. 

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Trading hours:  The Forex market is traded 24 hours per day from about 7pm EST on Sunday until about 3pm EST on Friday.  

 

The stock market is only traded Monday thru Friday with limited hours.

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Liquidity:   Forex markets trade over $1.5 trillion each day while the stock market only around $200 billion. There are only 7 major currencies traded on the Forex while there are more than 40,000 stocks from which to choose.

Commissions: No commissions are charged on the Forex while the stock markets charge high commissions and transaction fees.

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Leverage:  Forex Market offers great leverage power.  Brokers usually offer from 100:1 to 400:1 leverage.  This means a trader using 100:1 leverage you control $100,000 with only $1,000 margin.  

 

Stock market investors pay full price for stock when purchased unless they have a margin account and the leverage with margin is usually  only 2:1.   

Low Minimum Investment:  The minimum initial investment to open a Forex trading account is as low as $300.  Most stock brokers require several thousand dollars as a minimum to open an account.

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This is the perfect market. Foreign Exchange trading has long been recognized as a superior investment opportunity by major banks, multinational corporations and other institutions.  

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Now the internet has propelled Forex trading among private individuals tremendously. Trade from home, the office, or virtually anywhere in the world.  Trade virtually anytime day or night.  Work part time or full time.

It is obvious that the Forex Market offers a substantial opportunity to those willing to invest energy, focus, and a little money.
 
It is difficult for a new Forex trader to become successful in the Forex market without understanding the basics and how it works.  This knowledge can be obtained in a free Forex training program.

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Forex Trading And The Stock Market - Similarities And Differences

Most people get their introduction to financial trading through the stock market. After all, it is the oldest and largest financial market in the world, right? Wrong!

 

The forex trades over $2 trillion (with a "T") a day, and has been around as long as money itself . What's more, the forex is even easier for individuals to participate in than the stock market-and best of all, there are no commissions on forex trades!

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That is one difference. But there are also plenty of simi...

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Most people get their introduction to financial trading through the stock market. After all, it is the oldest and largest financial market in the world, right? Wrong! The forex trades over $2 trillion (with a "T") a day, and has been around as long as money itself . What's more, the forex is even easier for individuals to participate in than the stock market-and best of all, there are no commissions on forex trades!

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That is one difference. But there are also plenty of similarities. Since most people have a relatively strong understanding of the stock market, and many may be considering a move from the stock market to the forex, this article will explore the differences and similarities between the two financial markets.

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Differences

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As noted above, there are no commissions on forex trades. This is because everything is done electronically. In fact, there is no physical place known as "the forex" -- it exists entirely in cyberspace. That makes for much lower overhead, hence the "free trades" (see similarities for why trades aren't exactly free), and also allows for a twenty-four-hours a day trading platform, five-and-a-half days a week.

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Secondly, while many stock-market investors use margin, most don't. In the forex, everyone uses margin -- and to a much larger degree than anyone uses it in the stock market. In the stock market, margin is capped at 50%.

 

This means that if you have $5,000 in your account, the maximum value of stock you can purchase is $10,000. But in the forex, typical margin ratios are 100:1, meaning you can control $100,000 of worth of currency with just $1,000 in your account! This is one of the major appeals of the forex.

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Thirdly, while there are 13,000+ stocks for stock-market investors to follow (and even more mutual funds, ETFs, etc.), there are essentially eight major currencies (and only seven currency pairs) for forex traders to follow.

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Similarities

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Well, forex trades aren't exactly "free." Just like in the stock market, there is a bid/ask spread. What this means it that the market maker will pay you less for a currency than the price for which he is willing to sell it to you.

 

For example, you may be able to buy $1 in U.S. currency for $1.0905 in Canadian money, but when you want to turn around and buy back Canadian dollars, you will have to pay more than one U.S. dollar to get back your 1.0905 Canadian dollars.

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Perhaps the biggest similarity between the stock market and the forex is the use of technical analysis -- also known as "chartology."

 

Technical analysis principles hold up no matter what asset is being traded, so if you've become a master candlestick-reading stock trader, you can easily apply your talents to the forex.

Finally, when placing a trade, many of the same options are available in the forex as in the stock market.

 

Limit orders -- which set the maximum price you're willing to pay or the minimum price you're willing to receive -- can be used in the forex just as with stocks, as can stop losses.

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In Conclusion...

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There are a lot of similarities between the stock market and the forex, and some experience trading stocks is a good thing to have under your belt. But far superior is experience actually trading currencies, and this is not a Catch-22.

 

You can trade currencies before you really join the forex by opening a forex practice account. Most forex brokers offer these accounts, free of charge, which let you get your feet wet without the risk of getting soaked.

 

Learn all you can about the forex, try out your strategies in a practice account, and in little time at all, you'll be ready to swim with the big fish in the biggest pond in all of finance -- the forex!

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FOREX Beats the Stock Market

 

A comparison of investing in the FOREX exchange or the stock market.

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Companies issue stocks to raise capital for expansion, equipment and other projects. Stocks have been a very popular form of investment for years. Each share of a stock a person owns represents a small ownership of the company.

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Stock values fluctuate based on the fortunes of the company. When the company is doing well the stock price will increase, at this time the investor can sell their stock to capture the profit or they can continue to hold it in hopes of greater profits in the future.

 

Some companies will pay dividends on stocks; dividends are a small share of the profit per each share of stock.

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To buy and sell stocks you must use a broker and go through one of the stock exchanges. In the US there are two exchanges, the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation System (NASDAQ).

 

Some very large companies may have stocks on multiple exchanges but most companies will sell their stocks on one or the other.

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Until recently the stock market was seen as a long-term investment strategy. Most portfolios would have a large number of "Blue Chip" stocks.

 

These are stocks that have proven their value over a long period of time. With the addition of internet trading we are seeing what is typically known as day trading.

 

Day traders attempt to take advantage of the daily fluctuations in the market by making multiple trades during the day. This is a fairly high-risk method of investment and is further hindered by the large number of commissions charged for each transaction.

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In some cases stocks can be bought on margin. In the stock exchange your margin rates are usually about 50%, which means you need half the cost of the stock to be able to buy it. 

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FOREX

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The FOREX exchange is significantly different than the stock exchange. On the FOREX exchange almost all trades are short-term trades, in fact a trader may only hold a currency for a few minutes before moving it again.

 

Since there are no brokers fees in the FOREX exchange you can make numerous trades in one day without racking up large commission fees.

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With over $1.5 trillion in trades every day the FOREX exchange is the largest financial market in the world. To put this in perspective all of the American stock markets combined only handle about $100 billion worth of trades a day.

 

This huge volume causes the FOREX exchange to be the most fluid market in the world. Because so much of the world economy is dependent on moving currency from country to country there is always a buyer and a seller for every currency combination.

 

The stock market on the other hand is not nearly as liquid, you may not always find a buyer for the stock you want to sell or a seller for the stock you want to buy.

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The FOREX market is not located in a single place but is worldwide. Due to time zone changes the FOREX market is open 24 hours a day 5 days a week.

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Stock exchanges are normally only open for 7 hours a day, you can not buy or sell a stock if the exchange that it is listed on is closed at the time.

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FOREX is more predictable than the stock market as well. It follows well-defined patterns, you can also leverage better in FOREX than the stock market.

 

Margin accounts in FOREX run as high as 100:1 which means you only need $1 to buy $100 worth of currency.

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