Forex for a trader
Forex market vs stock market

Forex market vs stock marketWhy Trade Forex: Forex vs. Stocks. There are approximately 2,800 stocks listed on the New York Stock exchange. Another 3,100 are listed on the NASDAQ. Which one will you trade? Got the time to stay on top of so many companies? Aren’t four pairs much easier to keep an eye on than thousands of stocks? Look at Mr. Forex. He’s so confident and sexy. Mr. Stocks has no chance! That’s just one of the many advantages of the forex market over the stock markets. Here are a few more: The forex market is a seamless 24-hour market. Most brokers are open from Sunday at 4:00 pm EST until Friday at 4:00 pm EST, with customer service usually available 247. With the ability to trade during the U. S., Asian, and European market hours, you can customize your own trading schedule. Minimal or No Commissions. Most forex brokers charge no commission or additional transactions fees to trade currencies online or over the phone.

Most brokers are compensated for their services through the bidask spread. Instant Execution of Market Orders. Your trades are instantly executed under normal market conditions. Under these conditions, usually the price shown when you execute your market order is the price you get. You’re able to execute directly off real-time streaming prices (Oh yeeeaah! Big time!). Fills are instantaneous most of the time, but under extraordinarily volatile market conditions, like during Martian attacks, order execution may experience delays. Short-Selling without an Uptick. Unlike the equity market, there is no restriction on short selling in the currency market. Trading opportunities exist in the currency market regardless of whether a trader is long or short, or whichever way the market is moving. Since currency trading always involves buying one currency and selling another, there is no structural bias to the market. So you always have equal access to trade in a rising or falling market. Centralized exchanges provide many advantages to the trader. However, one of the problems with any centralized exchange is the involvement of middlemen. Spot currency trading, on the other hand, is decentralized, which means quotes can vary from different currency dealers.

Competition between them is so fierce that you are almost always assured that you get the best deals. Forex traders get quicker access and cheaper costs. BuySell programs do not control the market. How many times have you heard that “Fund A” was selling “X” or buying “Z”? The stock market is very susceptible to large fund buying and selling. In spot trading, the massive size of the forex market makes the likelihood of any one fund or bank controlling a particular currency very small. Banks, hedge funds, governments, retail currency conversion houses, and large net worth individuals are just some of the participants in the spot currency markets where the liquidity is unprecedented. Analysts and brokerage firms are less likely to influence the market. Have you watched TV lately? Heard about a certain Internet stock and an analyst of a prestigious brokerage firm accused of keeping its recommendations, such as “buy,” when the stock was rapidly declining? IPOs are big business for both the companies going public and the brokerage houses. Relationships are mutually beneficial and analysts work for the brokerage houses that need the companies as clients. That catch-22 will never disappear. Foreign exchange, as the prime market, generates billions in revenue for the world’s banks and is a necessity of the global markets.

Analysts in foreign exchange have very little effect on exchange rates; they just analyze the forex market. 2.1 Level 1 Forex Intro 2.2 Level 2 Markets 2.3 Level 3 Trading. 5.1 Short Term 5.2 Medium Term 5.3 Long Term. Differences Between Forex and Equities. While the mechanics of trading in the forex market is quite similar to equities in that prices fluctuate based on supply and demand, ever-changing bid and ask prices and the types of orders used by traders are pretty much where the similarities end. One of the major differences between the forex and equities markets is the number of trading alternatives available: the forex market has very few compared to the thousands found in the stock market. The majority of forex traders focus their efforts on seven different currency pairs. There are four "major" currency pairs, which include EURUSD, USDJPY, GBPUSD, USDCHF, and the three commodity pairs, USDCAD, AUDUSD, NZDUSD. Don't worry, we will discuss these pairs in detail in the next portion of our forex walkthrough. All other pairs are just different combinations of the same currencies, better known as cross currencies. This makes currency trading easier to follow because rather than having to pick between 10,000 stocks to find the best value, the only thing FX traders need to do is "keep up" on the economic and political news of these eight countries. Quite often, the stock markets can hit a lull, resulting in shrinking volumes and activity. As a result, it may be hard to open and close positions when you'd like to. Furthermore, in a declining market it is only with extreme ingenuity and sometimes luck that an equities investor can make a profit. It can be difficult to short-sell in the U. S. stock market because of strict rules and regulations.

On the other hand, forex offers the opportunity to profit in both rising and declining markets easily because with every trade, you are buying and selling at the same time, and short-selling is, therefore, a part of every trade. In addition, since the forex market is so liquid, traders are not required to wait for an uptick before they are allowed to enter into a short position, as is the rule in the stock market. (For more, see: The Uptick Rule Debate) Due to the high liquidity of the forex market, margins are low and leverage is high. It just is not possible to find such low margin rates in the stock market; most margin traders in the stock market need at least half of the value of their investment available in their margin accounts, whereas forex traders need as little as 2%. Furthermore, commissions in the stock market tend to be much, much higher than in the forex market. Traditional stock brokers ask for commission fees on top of their spreads, plus the fees that have to be paid to the exchange. Spot forex brokers take only the spread as their fee for each trade. (For a more, see Getting Started in Forex and A Primer On The Forex Market .) By now you should have a basic understanding of what the forex market is, how it works and the benefits and dangers all new forex traders should be aware of. Next we'll take a closer look at the currency pairs that are most widely used by traders in the forex market. Forex vs Stocks – What is the Better Market? Updated: February 19, 2018. The two major markets are the Foreign exchange market and the well known stock markets. Forex vs stocks? well In this chapter, we’re going to look at the advantages of trading the Forex market over stocks. Why we trade Forex and why many other traders and investors are making the switch.

If you mention trading to family or friends, they are most likely going to assume you’re talking about the stock market, not many people are actually aware of the Forex market. So if the stock market is so popular, why would someone choose to trade on the Foreign Exchange market? Here are the reasons why we, and many others favor the Forex market over the stock market. The number one argument for Forex vs Stocks is the whole open 24 hours deal. When trading stocks you are limited to their relative exchange’s trading hours. For example, the New York Stock exchange only operates Mon-Fri during New York business hours, and the London FTSE is only open for trade during the London business hours. The foreign exchange market however opens around 8 am Sydney time on a Monday in Australia, and closes around 5 pm New York time in the United States on a America Friday. This basically means that Forex is a 24 hour market open during the 5 day business week. This flexibility is great for traders; you don’t have to be available for any specific time frame. The freedom to trade when you want allows you to integrate trading into your busy life easily. Especially when you use end of day trading strategies. Forex brokers usually don’t charge commissions or transaction fees.

They make their money through spreads (by selling currency to you at a slightly higher price than what they can buy it for), which are dirt cheap when compared to the stock market. Brokers are able to offer cheap spreads and make good returns due to the sheer volume of Forex transactions that they experience on a daily basis. The truth is that Forex is the cheapest market to trade in the world. To begin trading stocks you need to have a lot of initial capital to be able to make reasonable returns. This is because the stock market offers very low leverage. Leverage is the ability to use your money to control a larger sum of “borrowed” money in the market. The stock market only offers about 1:2 leverage, which means with $1000 you could control $2000 in an open position. Forex brokers generally have a larger range of leverage options available. A leverage ratio of 1:100 will allow you to control $100,000 in the market with only $1000 of your capital. It’s not uncommon for brokers to offer leverages up to 1:500 which means you can control $100,000 worth of currency with only $200. The New York stock exchange currently has about 2800 different stocks listed, that’s 2800 different markets to choose to trade from. There are another 2679 stocks listed on the NASDAQ exchange, so you can see how picking a stock to trade can be overwhelming. The Forex market’s focus is around the major global currencies. The United States Dollar (USD) The EURO (EUR) The Great British Pound (GBP) The Japanese Yen (JPY) The Swiss Franc (CHF) The Australian Dollar (AUD) The Canadian Dollar (CAD) It’s much easier to follow these 7 major currencies than to try keep up to date with thousands of stocks. Less Susceptible to Manipulation.

The stock market is vulnerable to price manipulation. Large companies can force certain stocks to move by buying or selling them in large amounts, driving the smaller traders out of their positions. The stock market is also more susceptible to analyst’s ‘recommendations’ and news events that may affect that company’s perceived performance or reputation. News, or rumours, can in turn cause a particular company’s stocks to unexpectedly move rapidly in one direction. Because of the epic scale of the Forex market, no one company or bank can forcefully move the Forex market like they can in the stock exchange. The amount of money required to force a currency to move is just beyond the capabilities of large companies, even single banks cannot force currency prices to move in their favor. In the debate of Forex vs stocks, the Forex market really shines here. Only a country’s central bank has the power to manipulate currency prices, and that’s using the full power of the country’s economy. Sometimes central banks forcefully depreciate their home currency to increase their importexport sector, which in turn will boost the economy. No Restrictions on Short Selling. During stock market crashes it is possible for short selling bans to be put in place by the stock exchange. This means you cannot open any new short trades.

During market crashes it is very hard to find buyers for your crashing stock. Imagine you are currently holding stocks, and you see the market collapsing. The first thing you want to do is sell off your stocks before they lose too much value. No one wants to buy stocks in the middle of market crashes. Unless you can find a willing buyer for your stock you may be forced to sit by and watch your money disappear. If you can find a buyer, it is most likely going to be at a very cheap price. In the Forex market, there is no shame in shorting during market crashes. In fact, Forex traders can make fast money when the markets are plummeting in chaos. Currencies are traded in pairs. You’re always buying one currency to sell the other.

One could go as far to say that you’re always a bull and a bear at the same time. So in the overall argument of Forex vs stocks, I find myself being a passionate Forex trader due to the advantages it offers. If you would like to learn more about becoming a professional part time, or even full time Forex trader using price action strategies, then feel free to check out our War Room membership. It includes our Price Action Protocol course that teaches you in detail how to trade with price action. Also included in the course are our powerful money management models and them membership also provides a nice social network for traders. Should you trade forex or stocks? Today's investors and active traders have access to a growing number of trading instruments, from tried-and-true blue chip stocks and industrials, to the fast-paced futures and foreign exchange (or forex) markets. Deciding which of these markets to trade can be complicated, and many factors need to be considered in order to make the best choice. The most important element may be the trader's or investor's risk tolerance and trading style. For example, buy-and-hold investors are often more suited to participating in the stock market, while short-term traders – including swing, day and scalp traders – may prefer markets wherein price volatility is more pronounced. In this article, we'll compare investing in the forex market to buying into blue chips, indexes and industrials. Forex Versus Blue Chips. The foreign exchange market is the world's largest financial market, accounting for more than $5 trillion in average traded value each day as of 2016 (date of the most recent BIS Triennial Central Bank Survey). Many traders are attracted to the forex market because of its high liquidity, around-the-clock trading and the amount of leverage that is afforded to participants. Blue chips, on the other hand, are stocks from well-established and financially sound companies.

These stocks are generally able to operate profitably during challenging economic conditions and have a history of paying dividends. Blue chips are generally considered to be less volatile than many other investments and are often used to provide steady growth potential to investors' portfolios. Volatility. This is a measure of short-term price fluctuations. While some traders, particularly short-term and day traders, rely on volatility in order to profit from quick price swings in the market, other traders are more comfortable with less volatile and less risky investments. As such, many short-term traders are attracted to the forex markets, while buy-and-hold investors may prefer the stability offered by blue chips. Leverage. A second consideration is leverage. In the United States, investors generally have access to 2:1 leverage for stocks.

The forex market offers a substantially higher leverage of up to 50:1, and in parts of the world even higher leverage is available. Is all this leverage a good thing? Not necessarily. While it certainly provides the springboard to build equity with a very small investment – forex accounts can be opened with as little as $100 – leverage can just as easily destroy a trading account. Trading Hours. Yet another consideration in choosing a trading instrument is the time period that each is traded. Trading sessions for stocks are limited to exchange hours, generally 9:30 A. M. to 4pm Eastern Standard Time (EST), Monday through Friday with the exception of market holidays. The forex market, on the other hand, remains active round-the-clock from 5 P. M. EST Sunday, through 5 P. M. EST Friday, opening in Sydney, then traveling around the world to Tokyo, London and New York. The flexibility to trade during U. S., Asian and European markets – with good liquidity virtually any time of day – is an added bonus to traders whose schedules would otherwise limit their trading activity. Forex Versus Indexes. Stock market indexes are a combination of similar stocks, which can be used as a benchmark for a particular portfolio or the broad market. In the U. S. financial markets, major indexes include the Dow Jones Industrial Average (DJIA), the Nasdaq Composite Index, the Standard & Poor's 500 Index (S&P 500) and the Russell 2000. The indexes provide traders and investors with an important method of gauging the movement of the overall market. A range of products provide traders and investors broad market exposure through stock market indexes.

Exchange-traded funds (ETFs) based on stock market indexes, such as S&P Depository Receipts (SPY) and the Nasdaq-100 (QQQQ), are widely traded. Stock index futures and e-mini index futures are other popular instruments based on the underlying indexes. The e-minis boast strong liquidity and have become favorites among short-term traders because of favorable average daily price ranges. In addition, the contract size is much more affordable than the full-sized stock index futures contracts. The e-minis, including the e-mini S&P 500, the e-mini Nasdaq 100, the e-mini Russell 2000 and the mini-sized Dow Futures are traded around the clock on all-electronic, transparent networks. Volatility. The volatility and liquidity of the e-mini contracts are enjoyed by the many short-term traders who participate in stock market indexes. Let's say that the major equity index futures trade at an average daily notional value (the total value of a leveraged position’s assets) of $145 billion, exceeding the combined traded dollar volume of the underlying 500 stocks. The average daily range in price movement of the e-mini contracts affords great opportunity for profiting from short-term market moves. While the average daily traded value pales in comparison to that of the forex markets, the e-minis provide many of the same perks that are available to forex traders, including reliable liquidity, daily average price movement quotes that are conducive to short-term profits, and trading outside of regular U. S. market hours. Leverage. Futures traders can use large amounts of leverage similar to that available to forex traders.

With futures, the leverage is referred to as margin, a mandatory deposit that can be used by a broker to cover account losses. Minimum margin requirements are set by the exchanges where the contracts are traded, and can be as little as 5% of the contract's value. Brokers may choose to require higher margin amounts. Like forex, then, futures traders have the ability to trade in large position sizes with a small investment, creating the opportunity to enjoy huge gains – or suffer devastating losses. Trading hours. While trading does exist nearly around the clock for the electronically traded e-minis (trading ceases for about an hour a day to enable institutional investors to value their positions), the volume may be lower than the forex market, and liquidity during off-market hours could be a concern depending on the particular contract and time of day. While outside the scope of this article, it should be noted that various trading instruments are treated differently at tax time. Short-term gains on futures contracts, for example, may be eligible for lower tax rates than short-term gains on stocks. In addition, active traders may be eligible to choose the mark-to-market (MTM) status for IRS purposes, which allows deductions for trading-related expenses, such as platform fees or education. In order to claim MTM status, the IRS expects trading to be the individual's primary business. IRS Publication 550 and Revenue Procedure 99-17 cover the basic guidelines on how to properly qualify as a trader for tax purposes.

It is strongly recommended that traders and investors seek the advice and expertise of a qualified accountant or other tax specialist to most favorably manage investment activities and related tax liabilities, especially since trading forex can make for a confusing time organizing your taxes. See Investopedia's forex broker reviews and stock broker reviews to help you start trading. The internet and electronic trading have opened the doors to active traders and investors around the world to participate in a growing variety of markets. The decision to trade stocks, forex or futures contracts is often based on risk tolerance, account size and convenience. If an active trader is not available during regular market hours to enter, exit or properly manage trades, stocks are not the best option. However, if an investor's market strategy is to buy and hold for the long term, generating steady growth and earning dividends, stocks are a practical choice. The instrument(s) a trader or investor selects should be based on which is the best fit of strategies, goals and risk tolerance. Forex Market vs. Stock Market. We are the easy social team. Follow us on Twitter, Facebook, G+, YouTube & Linkedin for more great articles, videos, contests, tips, news and more! The foreign exchange (Forex) market is a place where currencies of various nations are constantly bought and sold by people across the local and global markets. This is quite similar to a stock market, where investors buy and sell shares and their derivatives.

Trading in both the markets is done with the single aim of making profits. Moreover, trading in both the markets is done with the help of brokers. This is where the similarities in both the trade markets end. Forex Market versus Stock Market: Points of Difference. While the Forex market involves the trading of currencies, the stock market is a place where a company’s stocks are traded. Besides this simple difference, there are multiple points of dissimilarities between the Forex market and the stock market: Trading Time : The stock market is open for trade for limited hours in a day. In contrast, the Forex market remains open 24 hours a day, five days a week. With the Forex market remaining open through the day, investors have the flexibility to trade at any time that is convenient to them. Liquidity : While the stock market is prone to high liquidity risks and price volatility, liquidity is never a concern in the Forex market. In fact, the Forex market is the world’s most liquid market, with a daily turnover exceeding $3 trillion. Leverage : Unlike the stock market, where there is limited leverage (this is akin to a loan offered by a broker to an investor), you can invest more money than you actually have in the Forex market. In the Forex market, leverages range from 50:1 to 200:1. This means if you have $1,000 in your margin account and your broker is offering 100:1 leverage, you have the option of trading up to $100,000 worth of currency. This offers you the opportunity to earn immense profits with limited capital. Commissions : While in the stock market, brokers charge fees on every transaction conducted on behalf of their clients, there are no commissions or fees in the Forex markets. Brokers only charge the spread, which is the amount by which the ask price exceeds the bid price of a currency pair. Short Selling : Unlike in the stock market, investors do not face any restriction in short selling in the Forex market.

Market Trends : Unlike the stock market, the Forex market does not see one-way traffic at any given time. If the exchange rate for one currency declines, it moves up for another currency. Thus, investors have an opportunity to profit throughout the year. Trading Information : The Forex market is one of the fairest financial investment markets, as everyone has easy access to all information required to make vital trade decisions at any given time. This is quite unlike the stock market, where analysts and professional traders have access to inside corporate information, providing them a competitive edge. Moreover, finding a good trading opportunity in the stock market might mean scanning data related to thousands of companies. In the Forex market, traders need to focus only on six major currencies. Volatility : The demand for currencies is unlikely to diminish even if the Forex market for that currency is weakening. So, there will always be buyers for your currency, making extreme volatility a very rare occurrence in the Forex market. This is not the case in the stock market, where the demand for a stock is dependent on market sentiments. Lot Size : In the stock market, you can buy or sell only a limited quantity of shares at a specific price at any given time. In the Forex market, a lot of a practically unlimited size can be sold or bought at a specific market price. These are some of the many reasons that are driving several retail investors to the Forex market from the stock market. easyMarkets offers personal technical support and Live training services to make forex trading a pleasant experience.

You may also trade the value of a stock market via Indices trading. How can you compare forex trading to trading individual stocks? With InterTrader, the forex market and the stock market are equally simple to access, via the same trading account, but there are several key reasons why you might prefer one market to the other: Are you looking to make a small number of trades each with a significant return? Or do you want to make numerous short-term trades and rely on your risk management strategy to control your bottom line? What is your risk profile? Are you happy to increase your risk for the chance of a quick return? Stocks, particularly blue-chips, are generally used for longer-term buy-and-hold investments, where your return will be determined over weeks and months. Picking which stocks to trade is often based on quantitative data like a company’s balance sheet or more qualitative factors such as the reputation of a particular brand. By contrast, the typical volatility of the forex market provides a more suitable venue for day traders, looking to make a profit from short-term price swings with or against the prevailing trend. While the forex market supports many different trading styles, often you’ll find that forex traders want to spot patterns in the price history and have little interest in holding positions for any length of time. Due to the high trading volumes of the forex market, spread betting and CFD providers will typically offer far greater leverage on forex trades than on stock trades. For instance, with InterTrader retail clients can trade UK blue-chip stocks with a minimum margin requirement of 20% of the position size, while professional clients can trade at 3% of the position size. By contrast, retail clients can trade major forex pairs at 3.33% margin, while professional clients can trade at just 0.5%. For example, if GBPEUR was trading at 140.00, a professional client could open a ?1 per pip position for just ?70, representing a gearing ratio of 200:1. So your riskreturn is 200 times the riskreturn of the equivalent physical trade. While leverage does maximise the return on your investment capital, you should note that it similarly maximises your risk and take suitable risk protection measures as provided by InterTrader.

The forex market and the stock market each offer freedom of choice in a different way. In the stock market you’ll find literally thousands of individual stocks to trade across exchanges worldwide, a staggering amount of choice even when you restrict yourself just to the blue-chips on each exchange. Conversely, the forex market consists of a small list of major forex pairs and a slightly longer list of minor pairs. There are a fair number of currencies to exchange around the world, but nothing like the colossal number of listed companies to trade. And even then, forex traders tend to narrow their activities down to four or five heavily traded pairs. So do you want to sift for trading opportunities among thousands of available stocks, or would you rather focus your attention on a small number of markets that typically produce significant activity? On the other hand, the forex market provides trading opportunities right around the clock. While stock exchanges are ruled by opening and closing hours, you can trade your favourite forex pairs at any time during the trading week (Sunday 23:00 to Friday 21:15). Whether you prefer to trade when you return home from work, or you seek inspiration in the small hours of the morning, you are free to trade your way. Why trade forex? Because the forex market is so vast, with $4 trillion traded on any given day, no single participant can have as great an impact on the market for an individual forex pair as they can have upon individual stocks. If a large institutional investor buys or sells a stock this can massively influence the price in contrast to any trends you are tracking.

Similarly, influential analysts can skew prices with their recommendations. You will have to account for these potential effects in your trading plan if you choose to trade stocks. By contrast, the size of the forex market means that, under normal circumstances, it cannot be cornered by major players. This might help to give you greater confidence if you choose to trade forex. Trading in Forex vs Trading in Stocks. With only a stable Internet connection, retail traders have access to financial markets. But with global markets at their fingertips, what is best: trading in Forex or trading in stocks? Or both? Before anything, trading financial markets isn’t for everyone.

The recent rise and fall in the cryptocurrency universe is the best example. People depleted their savings to pile on the long side as the FOMO (Fear of Missing Out) sentiment prevailed. Some sold their house and put everything in the “new gold.” However, the same people have a problem now. Most likely, they face bankruptcy. The market retraced over sixty percent from the highs. What is the lesson to learn here? There’s only one answer: diversification. When diversifying a portfolio, traders manage risk. What risk, you might ask? The risk of something like above won’t happen to the trading account. Because of greed, retail traders still look at financial markets as the place where they’ll get rich. However, can you get rich trading Forex? Do you know what it takes for successful trading in Forex? Or, what is stock market trading? And, is it similar to FX trading?

The same questions apply to any market. Why would anyone trade a market if heshe doesn’t know the ins and outs of it? This article aims to: Explain what trading in Forex is Show how to trade on the stock market Pros and cons of trading in stocks Compare trading in Forex vs. trading in stocks. But, above all, it aims to answer questions like: Is Forex trading profitable? How to profit from trading in stocks? And, how to avoid taking unnecessary risks. After all, that’s what trading is, right? Currency trading is so popular today that everyone heard of the Forex market. But do people understand the foreign exchange trade? The financial system as we know it depends on the USD. Because it is the world’s reserve currency, the entire Forex market depends on its valuation. Therefore, trading in Forex implies trading the USD. You might disagree with this statement, but: Sovereign states build currency reserves in USD Oil and significant commodities have the price in USD IMF (International Monetary Fund) and other big financial institutions mainly lend in USD. Hence, what happens with the USD matters for the world. And, it matters when trading in Forex too. As the largest financial market in the world, the foreign exchange market has an impressive turnover. Over five trillion (with a T!) dollars change hands every single day! Because of the enormous volume, it makes it difficult for any single entity to manipulate prices. Hence, trading in Forex is the purest manifestation of technical and fundamental skills. The Forex market is the place where the world’s currencies fluctuate against each other. In economic terms, they free-float.

The so-called fiat money in the free world has different valuations around the globe. Because every currency represents an economy’s strength or weakness, trading in Forex implies making economic comparisons. That is, comparing two economies and selling or buying a currency based on the outlook. A growing economy triggers higher interest rates. Hence, the fiat currency becomes attractive. As such, traders have a bullish bias. They want to own the currency. So, they buy. Or, go long. A slowdown in economic activity leads to lower interest rate levels. Inflation falls, the currency weakens. Traders sell the currency.

They go short. But, the problem is, against what currency to buy or sell? Is Forex Trading Profitable? Sometimes, a currency appreciates only against some currencies. And, depreciates or losses value against others. The first quarter of 2018 illustrates it perfectly. The Euro, the Eurozone’s common currency, rose against the commodity currencies (CAD and AUD). Here’s the EURAUD 2018 price action. It shows a huge bullish trend. It rose almost a thousand pips. How about EURCAD? The other commodity currency (CAD) fell like a rock against the Euro. Over a thousand pips in a robust and bullish trend!

However, against the USD, the Euro consolidate. For the entire first quarter of 2018, it stood in a narrow range. Therefore, is Forex trading profitable? Yes and no. Yes, if you trade the right instrument. Or, the one that moves, if you’re a swing trader or investor. Yes, if you trade the right instrument. Or, the one that sits in a range, if you’re a scalper. Hence, a swing trading or investing strategy made money on the long side on EURAUD and EURCAD. But, lost on EURUSD. Moreover, a scalping strategy proved disastrous on EURAUD and EURCAD. But, it made money on the EURUSD pair. As such, trading in Forex is not about a single currency. Instead, it is about a currency pair and its valuation against other currencies.

The Forex dashboard revolves around the USD. As its pillar, the USD volatility affects a trader’s profitability. When the USD doesn’t move, nothing moves. Hence, to make a profit when trading in Forex, traders need to understand what moves the USD. Here are some things to consider: Inflation – CPI – consumer price index PPI – producer price index Jobs data ADP – private payrolls NFP – non-farm payrolls jobless claims unemployment rate AHE – average hourly earnings GDP – gross domestic product. Technical Analysis in Forex Trading. Besides the above, general economic data on: Consumer’s health Construction sector’s performance Manufacturing and services sectors data will help to build the big picture. However, an analysis like this helps to interpret ALL economies. Hence, traders use the same criteria to compare different economies. Next, they look at how the currencies appear grouped on the Forex dashboard. Finally, they buy or sell a currency pair (not a currency) based on economic differences.

But, that sounds a bit complicated, right? Not everyone is an economist. Moreover, some people don’t have time to monitor economic data. So, what’s the solution? Is it one? Fortunately, trading in Forex works from a technical perspective too. Technical traders use charts to interpret markets. They check the information on the left side of a chart to project future levels. Any Forex broker offers access to a trading platform with an entire range of trading tools to use. Here’s a list, to name a few: Trend indicators Bollinger Bands Ichimoku Kinko Hyo Moving Averages Parabolic SAR Oscillators RSI – relative strength index DeMarker MACD – moving average convergence divergence Stochastics Fibonacci tools Retracement Expansion Fan Time zones Andrew’s Pitchfork Gann tools Trendlines and channels Trading theories Elliott Waves Drummond Point and Figure Dow Theory. Depending on the trading style, each tool has a purpose. For example, the Elliott Waves Theory doesn’t work without Fibonacci tools. Moreover, scalping fails and swing trading or investing works when counting waves. On the scalping side, oscillators do a great job. Either buying oversold or selling overbought; scalpers observe them. In the end, trading in Forex is about: Understanding the market Picking the right strategy Using risk management. Trading stocks differs. In fact, the two markets vary so much, that the procedure to approach them varies too. Equities or stocks move for a different reason.

On the one hand, there’s company related information. On the other hand, there are general monetary policy decisions that affect trading on the stock market. If you want, the monetary policy is the common ground for trading in Forex and trading in stocks. Fundamental and technical analysis work too, but: Economic data to interpret differs Technical analysis tools differ. A general trading in stocks approach implies the now famous “buy and hold”strategy. Warren Buffett, the renowned investor, is an avid pursuer of it. And, it proved him right. He continuously bet against the doomsday, buying stocks on any cyclical dip. When deciding to trade stocks, first decide on what to trade: individual stocks or an index. Next, find out what matters for the two categories. Finally, make the right decision based on the trading plan and style (scalping, swing trading, investing). Trading in stocks implies buying or selling a piece of a public company. Companies decide to list part or all their shares on a stock exchange, to raise capital for expanding the business.

Therefore, anyone can own a piece of a company. Or, a share of it. Ever seen something you like, like a T-shirt, a personal computer, or a boat? Chances are you can find shares of the companies owning them. And, just like that, you’re involved in the stock market. Trading in stocks has different “frictional expenses”. In plain English, the fees and commissions differ than trading in Forex. Trading in Forex has the same rules for both long and short positions. However, when trading in stocks, one exposes to unlimited liabilities if on the short side. Individual Stocks to Trade. Unlike trading in Forex, trading in stocks offers the possibility to earn a dividend. As such, the dividend yield or the dividend size plays an essential role when picking a stock to trade. When trading an individual stock, traders check a company’s: Types of shares offered (g., preferred, common) Financial statements Income statement Shows info related to Revenues Expenses Profit and loss Balance sheet Shows info related to Assets Liabilities Cash flow Shows info about Cash inflows Cash outflows Retained earnings Shows changes in equity, like Sale of stock Repurchases Dividend payment. The first to are the most important ones in valuing a company.

Other things like earnings per share and various ratios help too. Because any company listed on a stock exchange is public, the info is public information. Hence, anyone can find it and use it for hisher own purposes. Internal news influences the price of individual stocks too. Not one, insider trading held the headlines on Wall Street. All these, and much more, are pieces of information to know about trading in stocks. And, they don’t exist when trading in Forex. Traders must be aware of the earnings calendar too. Every quarter, public companies release financial statements. They provide a great deal of volatility in the price of a stock. Moreover, some companies release the earnings statements after hours, when the market is closed. Low liquidity levels make the price swinging hard.

As a result, short-term oriented strategies have little chances to survive in such an environment. Changes in management influence the price of an individual stock. CEO’s (Chief Executive Officer) and CFO’s (Chief Financial Officer) come and go, and the market interprets the moves as positive or negative for an individual stock. How to avoid following all the things listed above? Luckily, indices exist. An index is a weighted basket of various individual stocks. Most known indices around the world are: Dow Jones – United States S&P500 – United States Russel – United States Nasdaq – United States Xetra Dax – Germany Cac40 – France Ibex – Spain Nikkei – Japan. In this case, trading in stocks means buying or selling an index. The Dow Jones in the United States, for example, has thirty companies in its componence. The companies listed belong to various economic sectors, like: Manufacturing Services IT Construction Financial services. Hence, trading in stocks via an index gives exposure to different industries. Therefore, traders reduce the risk of being exposed to one single company and industry.

However, trading an index bears many similarities with trading in Forex. The monetary policy in that jurisdiction affects the value of a stock and stock index. For example, assume the central bank starts a tightening cycle. More precisely, it starts raising the interest rates. Typically, there is an inversed relationship between tightening and the stock market. Namely, stocks don’t like higher interest rates. However, some stocks do. For example, financial stocks would benefit from higher interest rate levels. Here’s Goldman Sachs one-year evolution, in the midst of the Fed tightening. Trading an index might not give the same opportunities like trading an individual stock. But it provides protection against being too much exposure on one single company. Diversification is key. Remember? How to Start Trading Stocks.

Trading in stocks starts with picking the right broker. Nowadays, trading in stocks can be done via a Forex broker too. Stiff competition led to Forex brokers adding more products to a trading account. Therefore, besides the classic currency pairs, a Forex broker’s account also gives access to: Commodities trading (gold, oil, silver, and so on) Stocks trading (via CFD’s – contracts for difference, trading in stocks is available from a Forex broker’s account) Indices trading Bonds and options. Trading in Forex and trading in stocks from the same account has multiple benefits. One would be that traders use the two to diversify the portfolio. For example, the trader can split the trading account into two parts: one for Forex trading and another one for speculating on the stock market. This way, traders diversify the market exposure and better manage the risk of losing the trading account. Either from a Forex broker’s account or a stockbroker, you need a brokerage house to intermediate the transaction. Typically, fees for trading in stocks exceed the ones for trading in Forex, so that’s something to keep in mind.

Trading in Forex and trading in stocks have different particularities. In the end, both Forex and stock traders aim for the same thing: to make a profit. However, the time horizon of their trades leads to different strategies. Some people look to accumulate wealth via a buy and hold strategy. They save money from the regular day job and invest them in the stock market. By choosing an individual company’s stocks or one or multiple stock indices, retail traders actively participate in the financial market. A Forex vs stocks comparison indicates that the Forex market is: More liquid More volatile Hence, offers more trading opportunities. However, the stock market is: Transparent Better regulated Gives access to a suite of trading tools and instruments that don’t exist in currency trading. To sum up, the best way to trade stocks depends on each trader’s trading plan. Some traders buy stocks only for the dividend paid. As such, they keep the stock until the dividend date, then promptly dump it. Other traders follow closely market analysts and reports regarding various companies.

For example, if a company announces a buyback plan (the company buys its own shares), that’s a bullish statement. Traders jump in and buy the stock for a buy and hold opportunity. One thing traders keep forget: taxes. When trading in stocks and trading in Forex, any potential profit is taxed. Uncle Sam never sleeps, nor other financial authorities around the world. Therefore, make sure you understand the real costs of trading in Forex and trading in stocks, before committing capital to a live trading account. GET STARTED WITH THE FOREX TRADING ACADEMY. Damyan is a fresh MSc International Management from the International University of Monaco. During his bachelor and master programs, Damyan has been working in the area of financial markets as a Market Analyst and Forex Writer. He is the author of thousands of educational and analytical articles for traders. When being in bachelor school, he represented his university in the National Forex Trading Competition for students in Bulgaria and got the first place among 500 other traders. He was awarded a cup and a certificate at an official ceremony in his university. Forex VS Stock Market.

Forex VS Stock Market. The term Forex stands for Foreign Exchange or the Exchange of Foreign Currencies. The forex market is the largest financial market in the world. In past years, forex trading was considered the domain of financial giants, banks and institutions. However, looking at the opportunities of profit it provides to investors, many novice traders are now trying their hands with it. With the avenues of trading now opening to a whole lot of common people, the question of which course of trading to take is widely asked. A trader wishes to find the pros and cons of all other kinds of trading to finally choose the best option. It’s a known fact when words fail to explain a thing, a picture often does. We are going to define to you the difference between forex business and stocks to give a clear idea of what best suits your style of trading and how forex is better than any other market. Infograhic by : Pacforex Forex Trading Platform. To publish this image on your website or blog . Copy this code. Trading hours.

The forex market works 24 hours of 5 days, while the stock market starts at 9 in the morning to 4 in the afternoon every day from Monday to Friday. Leverage. Forex trading provides a leverage of 300:1, when stock market on the other hand has the leverage of 2:1. Structure. Since the forex market deals with foreign currency, it does not require much hassle to purchase it. It can be bought over the counter while for stocks, one has to be a member of the exchange. Fees The stock market has fees for almost everything, ranging from spread to commission to other additional fees. But forex has a fee for only the spreads. Volume. The volume of forex is USD 5.3 trillion a day, whereas stocks have a volume of USD 100 billion. This shows that the forex market has most liquidity.

Trading Decisions. Forex primarily deals with 8 major currencies and some other exotic pairs too, whereas there are about 5,000 public trading companies in U. S alone. This makes trading decision easier for the forex investor. Order Execution. The orders in forex get delivered immediately, but in stocks they often take time. This is a reason forex trading is recommended over stocks. Security There is greater security of capital with Forex, because the trade is done mainly in 8 currencies and the chances of these currencies falling in price is lower than that with stocks. The shares in stock market can come down any time as the companies involved are many in number and can end without any notification. Capital.

A forex account can be opened with just $200, but for stocks the share price determines the capital needed for the business to begin. Complexity It’s no big deal to keep 4 major currency pairs properly observed, while for stocks, the list of shares to keep under observation are several. This makes stock business more complex than the forex. Financial friction. A trader can directly make a purchase of currencies, without the need for a broker or a middleman like in stocks. Trading Marketplace. The trading of forex can be done remotely from any place, when stocks on the other hand are highly centralized to exchanges and markets. Forex Market versus the Stock Market. Enter your email address and we'll send you a free PDF of this post. For the past two decades, alongside the boom in the technological sector, the world has witnessed turbulence in its political situation.

These are the two factors that have led the world economy to take sharp turns, while simultaneously shutting down and also introducing new avenues of opportunities for many people in the financial markets. Amidst the wave of crises, people search for high end businesses that can guarantee them security in monetary terms too. There are several options available for the people aiming at becoming participants of the financial markets. However, the question of which career path out of forex, stock, and futures to follow still remains a heated debate for many traders. As mentioned earlier, because of the volatility of the political and economic picture in the world, and hence the changing currency rates. The forex market has undergone a zigzag course in recent years and so has the stock market. Trading, be it stock or forex, over the years has strictly remained a domain of big financial institutions, banks and organizations whereas, it has now crossed borders and is no longer the domain of financial conglomerates only. The forex market has participants from all facets of life trading it, yet there are new investors stepping in the market arena of both kinds of trading that would like to be enlightened about all aspects of both markets. Forex vs Stocks: The Ultimate Showdown. Sorry to disappoint, but there’s no showdown…it’s more like a back-alley beat down. I’m a Forex trader, what’d you expect?

?? But really, when it comes to Forex vs stocks there isn’t a ton of competition. I digress, stocks still have their place in the world. Heck, I still invest in stocks every month, but when it comes to trading I choose Forex over the stock market every day of the week. Here are the top 5 reasons why I like Forex over the stock market. #1 Opportunity Market Hours and Overlap. Being able to trade the Forex market 24 hours a day and 5 days a week can be a great advantage over the stock market, which is only open 8 hours a day and 5 days a week. The real advantage here is not being able to trade around the clock, but rather having 5 days of trading where there are no opening gaps in the morning. This means you can hold a trade overnight in the Forex market without worrying about a huge gap in the morning, which can and does happen in the stock market. While the ‘around the clock’ trading ability of the Forex market can be a major advantage, to the untrained Forex trader it can be an absolute curse. It can easily turn into long nights of staring at your screen watching every tick, biting your nails with anxiety. Trust me, I’ve been there! I developed my forex price action trading course to help traders avoid falling into this all too common trap. #2 Simplicity Major Pairs Make Trading Simpler. When it comes to Forex vs stocks and simplicity, there’s no comparison. This is because the eight major currency pairs account for the majority of market volume.

This is compared to the more than 2,000 listings on the NYSE alone! This allows traders to focus on fewer trading instruments while still providing plenty of trade setups. #3 Liquidity Money Movement: Forex vs. Stock Market. When comparing Forex vs stocks , the volume traded in the Forex market is substantially higher than that of the stock market. This means that under normal circumstances orders are filled with ease and there isn’t a large bid-ask spread. Now, unless you’re trading Warren Buffet’s bankroll you aren’t going to have an issue getting your order filled in terms of market liquidity. However, this does mean that the bid-ask spread will tend to be lower in the Forex market than the stock market. This is critical especially as your position size increases. Being able to get in and out of the Forex market without worry is a huge advantage over the stock market.

Take a look at the image above to get a feel for the massive discrepancy in liquidity between the Forex market and stock market. #4 Market Growth Heading in Opposite Directions. Yet another disparity between Forex vs stocks where Forex takes the day. The volume in each market is moving to opposite ends of the spectrum. In other words, volume in the Forex market is flourishing while volume in the stock market is slowing. Forex has been growing steadily for the past 15 years, while the stock market has returned to pre-2006 volume. #5 Profit Potential Forex vs Stocks. Leverage in the Forex market can turn small moves into large profits, and large losses if you aren’t careful. This is why having a coach to teach you how to trade price action is critical to your success as a trader. Take a look at the graph below. This shows two $2,500 investments – one a stock investment in Tesla Motors, Inc. and the other in AUDUSD utilizing 20:1 leverage. In the image above, we can see that Tesla rose by 234%, which is extraordinary, while the AUDUSD currency pair changed just 11%. However, due to leverage in the Forex market the profit was the same between the two instruments. As stated above, the leverage in the Forex market can be a great asset, but only if you know how to use it properly. Far too often I hear about traders abusing leverage which usually leads to losing more money than they bargained for. #6 Long or Short (Buy or Sell) You Choose.

Anyone who knows me will tell you that I like to save the best for last. This is by FAR my favorite aspect of trading Forex vs stocks. The ability to make money regardless of which way a particular Forex currency pair is trending is a great asset to the Forex market. What this means is that while you may need 20 stocks to make up a decent ‘watch list’, you may only need 10 currency pairs. This is because, due to the fact that Forex currency pairs can be traded long or short, they essentially give you twice as many trade setups as a single stock in the stock market. While you can go short in some cases in the stock market, you’ll need to jump through a few hoops with your broker to do so. Going short on a stock is also viewed as unethical by many, since you are essentially hoping that a company under performs. An extreme example of this was the shorting that took place to Lehman Brother’s stock in 2008. When it comes to the Forex market, the debate of whether to go long or short is irrelevant; the only thing that matters is finding the right price action trading strategies to trade. In closing, when it comes to Forex vs stocks I think Forex beats the stock market hands down. I’m obviously a little biased being a Forex trader, but when you compare the advantages over disadvantages I think you’ll find that Forex wins out. Whether you decide to trade Forex or the stock market, I strongly urge you to find an experienced coach who is actually trading using the strategies heshe teaches. To your trading success! Very interesting info!

Perfect just what I was looking for! ITS USELESS BULLLCRAPPP YOU CUNT ILL SUCK YOUR MOMS TITS AND PUSSY DRY IF YOU DONT SHUT THE FUUUCKKK UP RIGHT NOW BUT TOO LATE ALREADY SUCKED HER DRY NIGGEER. nigggaa what thE FUCK IS THIS BITCHH ASSS BULLSHITT. JUST GIVE ME MY MOTHERFUUCKIKIINNGGG MNOEY YOU CUNTTTTTTTTTTT. Watch the FREE Webinar! ? The Ultimate Forex Swing Trading Webinar. Follow me on this step-by-step journey to consistent Forex profits. Click the link above to ??get?? ??started. Private Trading Community. About Justin Bennett. Justin Bennett is a Forex trader, coach and founder of Daily Price Action, the world's most popular Forex price action blog. He began trading equities and ETFs in 2002 and later transitioned to Forex in 2007. His "aha" moment came in 2010 when he discovered the simple yet profitable technical patterns he teaches today. Justin has now taught more than 2,000 students from over 70 countries in the Daily Price Action course and community.

He has also appeared in various printed material including an interview in Stocks & Commodities magazine. Disclaimer: Any Advice or information on this website is General Advice Only - It does not take into account your personal circumstances, please do not trade or invest based solely on this information. By Viewing any material or using the information within this site you agree that this is general education material and you will not hold any person or entity responsible for loss or damages resulting from the content or general advice provided here by Daily Price Action, its employees, directors or fellow members. Futures, options, and spot currency trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This website is neither a solicitation nor an offer to BuySell futures, spot forex, cfd's, options or other financial products. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website. The past performance of any trading system or methodology is not necessarily indicative of future results. High Risk Warning: Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, and options and be willing to accept them in order to trade in these markets. Forex trading involves substantial risk of loss and is not suitable for all investors. Please do not trade with borrowed money or money you cannot afford to lose. Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice.

We will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results. Copyright 2018 by Daily Price Action, LLC. Please log in again. The login page will open in a new window. After logging in you can close it and return to this page.



Articles:

  • Forex market vs stock market