Easy Forex Trading Useful Information

The forex (foreign currency exchange) market is the largest and most liquid financial market worldwide. The forex market unlike stock markets is an over the counter market with no central exchange and clearing house where orders are matched.

Traditionally forex trading has not been popular with retail traders/investors (traders takes shorter term positions than investors) because forex market was only opened to Hedge Funds and was not accessible to retail traders like us. Only recently that forex trading is opened to retail traders. Comparatively stock trading has been in existence for much longer for retail investors. Recent advancement in computer and trading technologies has enabled low commission and easy access to retail traders to trade stock or foreign currency exchange from almost anywhere on the globe with internet access. Easy access and low commission has tremendously increased the odds of winning for retail traders, both in stocks and forex. Which of the 2 is an even better option for a trader? The comparisons of retail stock trading and retail forex trading are as follows;

Nature of the Instrument

The nature of the items being bought and sold between forex trading and stocks trading are different. In stocks trading, a trader is buying or selling a share in a specific company in a country. There are several different stock markets on the planet. Many factors determine the rise or fall of a stock price. Make reference to my article in under stock section to search out more details about the factors that affect stock prices. Forex trading involves buying or selling of currency pairs. In a transaction, a trader buys a currency from one country, and sells the currency from another country. Therefore the term "exchange". The trader is hoping that the value of the currency that he buys will rise with respect to the value of the currency that he sells. In essence, a forex trader is betting on the financial prospect (or at least her monetary policy) of one country against another country.

Market Size & Liquidity

Forex market is the biggest market worldwide. With daily transactions of over US$4 trillion, it dwarfs the stock markets. While you will find thousands of distinct stocks in the stock markets, you'll find just a few currency pairs in the forex market. Consequently, forex trading is less prone to price manipulation by big players than stock trading. Huge market volume also means that the currency pairs enjoy greater liquidity than stocks. A forex trader can enter and exit the market easily. Stocks comparatively is less liquid, a trader may find problem exiting the market especially during major bad news. This really is worse specifically for small-cap stocks. Also due to its huge liquidity of forex market, forex traders may enjoy better price spread in comparison to stock traders.

Trading Hours & Its Disadvantage to Retail Stock Traders

Forex market opens 24-hour while US currency markets opens daily from 930am EST to 4pm EST. It means that Forex traders can decide to trade any hours while stock traders are restricted to 930am EST to 4pm EST. One significant disadvantage of retail stock traders is that the stock markets are only opened to market makers during pre-market hours (8:30am - 9:20am EST) and post-market hours (4:30pm - 6:30pm EST). And it's during these pre-market and post-markets hours that a lot of companies release the earnings results that could have great influence on the stock prices. Consequently the retails traders (a lot of us) could only watch the cost rise or drop during these hours. Besides, stop order wouldn't be honored during this times. The forex traders don't suffer this significant disadvantage. Furthermore, a stock trader may supplement his/her trading with forex trading outside the stock trading hours.

To be able to trade stocks, a trader needs to have quite an important amount of capital within his account, at least a few tens of thousands in general. In contrast, a forex trader can start trading with the account of only some hundreds dollars. This is because forex trading allows for higher leverage. A forex trader could obtain larger transaction when compared with stock-market. Some forex brokers offers 100:1, 200:1 or 400:1. A leverage of 100:1 implies that a US$1k in account could obtain a 100 times transaction value at US$100k. There isn't any interest charge for the leveraged money. Stock trading generally allows for not more than 2 times leverage in margin trading. You can find interest charges affiliated with margin trading.

Data Transparency & Analysis Overload

You will discover thousands of distinct stocks within different industries. trader needs to research many stocks and picks the top few to trade. There are many factors that affect the stock prices. There are actually a lot more factors that will affects stock price than foreign currency exchange rates. The forex traders therefore can focus on few currency pairs to trade. In addition to that, most data or news affecting currency exchange rate are announced officially, scheduled as well as in a transparent manner. Retail forex traders therefore have better probability of success than retail stock traders.

Bear/Bull Stock Market Conditions

Forex traders can trade in both way buying or selling currency pairs with virtually no restrictions. On the flip side, stock traders have more constraints to trade and profit in bear market condition. There are actually more restrictions and costs affiliated with stock short selling. In a bull market when the economy is doing well, stock traders have a high chance of profitability if they buy stock first then sell it later. Savvy forex traders on the contrary, could operate in all of the market conditions.

Trending Nature of Currency

Major currencies are influenced by national financial forex markets (please click the next website page) policies and macro trends This national financial policies and macro trends often last long in the specific direction, either in monetary expansionary (rate cutting) or monetary contractionary cycle (rate hiking cycle). Stock prices however tend to fluctuate up and down as a result of many factors, many of these factors are micro and specific to the stocks. Therefore forex traders can better exploit the trends in foreign currency markets that stock traders in stock markets.

Generally, most major stock markets are better regulated than forex markets. For this reason, traders need to be aware of this difference to stock markets. Fortunately, there are actually however many reputable forex brokers within the market. With prudence and proper research, it is not hard to find a suitable reliable forex brokers.

In accordance with the above few points, forex trading seems to be a far better trading option than stock trading, especially during these uncertainties in the global economy. During bull market condition, stock trading may be a viable alternative. A stock trader should definitely seriously consider supplementing their trading with forex trading. Forex trading enables a stock trader to exploit any opportunity arises during non stock trading hours, by trading in forex trading. Forex trading would also enable the stock traders to understand a far more complete big picture of world economies operations and further enhance their stock trading skills.