Most people are aware of the stock markets, but very few people are aware of the forex market and how it operates. Even for beginners and those that want to trade in currencies, the forex market offers plenty of opportunities.
Unlike stocks, trading in forex is a global market
Forex or simply FX as it’s known deals with the global currencies. A trader can trade in several currencies at the same time. FX is always traded in currency pairs. This means that you would need to sell a currency and simultaneously buy the currency. While in stock trading you can simply sell or buy the shares at a given point of time.
While forex is traded in limited currency pairs, there are literally thousands of stocks that can be traded. This makes it quite difficult for a newbie to understand the stocks that should be bought and sold. However trading Fx isn’t that difficult.
The largest market
Globally the Fx market is worth over USD 3 trillion a day. Stock markets are individual markets that are operational in each ad every country. There are special laws and regulations for investors to buy stocks of companies that are operational in foreign country. Moreover special procedures and laws are required for companies to list the shares of the company in other countries as well.
Furthermore the stock market doesn’t even come close to the turnover of the Fx market.
Direct trading vs. trading through exchanges
Stock trading is conducted through central exchanges and has fixed time of operation. This mean that traders can conduct the stock trades during the working hours of the stock exchanges. However currency dealers can buy and sell currencies at any time during the day.
As the currency markets are operational 24 hours a day, profits and trading can be done at any point in the day. Dealers aren’t restricted by the time. Moreover the software bots can also execute the deals (given prior instructions by the dealer). This helps those in the currency market book better profits than those in the stock market. The main centres of forex trading are Sydney, New York, Tokyo, London and Frankfurt.
Huge leverage for beginners as they can trade on margin
Trading on margin simply means that you can trade high volumes even with a small capital. For example if you have $100 in your account, in the currency market you can trade for $10,000. This is known as trading on 1.0% margin or a leverage of 100:1. Forex traders don’t maximise this leverage, however they can earn really high amounts of profits by doing this.
In stock trading, the capital requirement is extremely high. For this reason, beginners can find it difficult to invest and trade in the stocks. High margin trading is one of the biggest advantages that beginners have (in comparison to stock trading) when they trade in forex.
Furthermore currency trading is done without any commissions; while in stock trading, the commissions are an important part of the trade. This makes it even more attractive for the beginners as well as other investors to trade in Fx.
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