Forex Trading – Stock vs Forex
There are thousands of stocks and companies available for traders to choose from, but you still wondering on how to get into currency trading. In forex, there’s a wide array of currencies to trade but majority of forex traders only focus on 4 major pairs.
The question is, are you willing to juggle all those companies and stocks you are trading? Or is it easier to just focus on four pairs that are actively significant as well?
Here are a few more advantages of forex over stocks:
24 hour market
As a global market, it is seamless 24 hours a day, open to traders around the world. This allows traders to customize their trading schedules.
Minimal or No Commissions
Most brokers gain profit from the bid / ask spread. Meaning most of them don’t charge additional transaction fees or commissions when trading. The cost of forex trading is very low compare to other markets – along with its consistent, tight and transparent spread.
Instant Execution of Market Orders
With normal market conditions, trades are almost instantaneously executed and the price you see during purchase is the price that you get.
A number of brokers guarantee only under normal market state limit, stop and entry orders. Fills are like spot orders that are most of the time executed immediately, but unstable market conditions may cause delays.
Short selling without an Uptick
Trades in the forex market have no restrictions whether short or long. This is due to the fact that trading currency always entails purchasing one currency and selling the other. The result is the market has no structural bias and traders have equal rights trading in a rising and falling market.
Centralized exchanges offer traders plenty of advantages. The downside here is that middlemen are always involved, and every time you trade will cost you money.
But with spot currency trading, quotes vary from various currency dealers as it is decentralized. In general, forex traders are offered faster access and lower costs due to fierce competitions between dealers.
Buy / Sell programs don’t control the Market
One issue with stock market is its vulnerability to large fund purchases and selling.
But with spot trading, controlling a particular currency and making significant impact to the market by a single individual, bank or fund is near impossible.
Analysts and brokerage firms are less likely to influence the market
The prime market which is foreign exchange is a necessity of global markets as they generate billions of revenue for the banks of the world. That’s why forex analysts only analyze the market as they have minimal effect on the exchange rates.