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Currency Market Vs Stock Market: A Brief Look

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by: youtradefxo
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Date: Fri, 2 Mar 2012 Time: 3:51 AM

If you are contemplating and considering why you should choose the currency market over the stock market, here are some reasons why forex is a better option in trading.

Leverage and Lower Margins

In the stock market leverage can be very complicated and a trader has to fill out application forms and get approved for the permission to trade with leverage while in the forex the privileged of getting leverage comes automatically when you open a trading account. You can get almost 100 times the leverage you get in stock which is mainly due the high liquidity of this market.

In trading forex the margin requirements are just 1%  while investing in stock it is almost 50%.Whlie trading on the basis of margins low margins can be a very lucrative way to create an investment strategy but the risks involved must be understood clearly or else you might end up liquidating your account.

Lower Commission

 Trading in forex has the advantage of being relatively commission free. This is far better for you... Even though you have to pay a commission charge to a forex broker as an intermediate the buyer with the seller the spread is usually larger than in other markets

Lower Risks

The risks are lower as it has guaranteed stop loss mechanism to limit the extent of damage. The trends in forex move slower than stocks and factors that affect the risk are completely different and more widespread,

High Liquidity

The sheer volume of the capital traded makes this market highly liquid. There is always a multitude of buyers and sellers interested to trade thus making it 100 times more liquid than the stock market.

24-Hour Marketplace

Currency market is open for longer duration then stock markets. They are open 24 hours a day barring the New York time Saturday and Sunday. You can make your trades anytime from Monday to Friday as opposed to stock markets which close everyday at a particular time.

No Bear Markets

In forex, if one currency is in a "bear market", then the other currency in the currency pair may be in a "bull market", thereby eradicating the concept of bear markets from trading.

More Freedom

Stock trading has many regulations and limits; forex trading does not have the same level of regulations. In forex trading, a trader can go short on a currency pair just as easy as you can go long with no specific regulation restrictions. The market is so extensive that no government or single body can control it.

Trading forex provides more opportunities than investing in stock does but requires a bit of learning for the investors. In the end one must chose the trade one is comfortable in be it forex or stocks.

About the Author

ali bell has years of experience in profitable investing in stock (Spanish: Invertir En Bolsa) and forex. He works for YouTradeFX that offers the best trading signals, platforms and software for the currency market (Spanish: Mercado De Divisas). Create a demo or live account here for greater benefits.

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