Forex or stocks - what to choose for a novice trader?
What is better Forex or stock? The main advantages of Forex and the stock market.
Forex is the largest market in the world. Does this mean that he has the largest number of currency pairs to choose from? This is not true. While there are about three dozen major currency pairs that are traded on the Forex market.
About 2,800 shares are listed on the New York Stock Exchange, and there are 3,100 shares on the NASDAQ. However, people still prefer the Forex market over the stock market because it’s easier to track a limited number of currency pairs than hundreds of stocks.
Similarly, there are many other advantages of the Forex market compared to the stock market.
See also our Forex brokers rating with a detailed description of brokerage companies, trading conditions and real reviews of traders.
Forex Stock Benefits
- 24-hour market. Forex is a 24-hour market that is open for five business days (Monday through Friday). Thus, no matter what part of the world you are in, you can always trade according to your own schedule. See also Forex trading sessions, and what time is better to trade. On the other hand, the stock market is only open 7-9 hours a day. This can be a daunting task for traders who, in addition to trading, still have the main work.
- Low commissions. Forex brokers usually do not charge commissions. Instead, they charge what is called a “spread” as compensation for their services. And this service charge is less compared to the fees of stock brokers. However, there are Forex brokers who charge fees, swap and relatively large spreads. Please note that all this depends on the type of broker you choose. There are different types of brokers in the Forex market. Usually they are divided into two types of brokers: Dealing centers and NDD brokers. No Dealing Desk brokers are further classified as STP and ECN brokers. We recommend that you choose ECN brokers, they have the opportunity to trade without a spread and with small commissions. On the other hand, there are several different types of fees on customers in the stock market, such as clearing fees, exchange fees, and other fees.
- Variable lot size. In the stock market, lot sizes are determined by exchanges. But in the Forex market, you have the freedom to choose your own lot or position size.
- Long and short trades. There is no difference between buying and selling on Forex. You can open both long and short positions. While in the stock market there is a restriction on short transactions. Consequently, this reduces trading opportunities for traders because they can only participate in growing markets.
- No intermediaries. Centralized stock exchanges provide traders with great benefits. However, this does not solve the problem of attracting intermediaries. The presence of intermediaries between the trader and the buyer or seller of shares will result in the payment of remuneration. On the other hand, the Forex market is decentralized, which means there are no intermediaries between the trader and the buyer / seller. It also means that quotes may vary by different Forex dealers. The competition between currency traders is so intense that you can get the best price almost every time.
- The Forex market cannot be controlled by one person or organization. The size of the currency market is so large that no one can independently dominate a particular currency. Banks, hedge funds and other large financial institutions are simply market participants that provide liquidity. While the stock market, on the other hand, is vulnerable to massive purchases and sales by large banks and funds that directly affect the stock price.
- High liquidity. A well-known fact about the Forex market is that it is very liquid. This is a great advantage for traders, as they can instantly buy or sell any currency pair, regardless of time or market conditions.
- Leverage. Another important advantage of Forex trading is that brokers allow traders to trade with large contracts even with a small account size. This gives traders the opportunity to make good profits and at the same time maintain minimal risk. For example, if a Forex broker offers a leverage of 1:50, then you can make a deal in the amount of $ 5,000 with only $ 100 in your account.
- Demo accounts. Almost all Forex brokers offer the possibility of free demo accounts. Demo accounts are a valuable resource for those who want to test their strategies and skills in the market without investing their real money.
- Minimum deposit. Most Forex brokers do not have a lower threshold for opening a trading account, that is, to start trading, you just need to replenish a deposit of $ 1 or more. However, we strongly recommend that you start trading Forex with at least $ 1,000. Trading with a deposit of less than $ 1000 turns into roulette every time you try to double your investment. Forex is not a casino, here you can’t break the jackpot in one evening. Forex is a painstaking job that requires knowledge and experience. Only if you have a proven strategy, following money management and self-discipline, you can start earning Forex from 5% per month or more.
See also what brokers with a minimum spread are.
Benefits of Stock Trading
The above are just some of the advantages of Forex trading over the stock market. However, the stock market also has many advantages. Below are some of the benefits of the stock market that you need to pay attention to.
- Long-term benefits. One of the most significant advantages of the stock market is that it offers a stable income in the long term. Given that the Forex market is very difficult to predict the long-term trend of the currency. Therefore, if you are an investor who is looking for stable passive income, then the stock market is your choice.
- Dividend income. Another advantage of investing in stocks is that it provides dividend income. Even if the stock price does not reach your goal, you will definitely receive these payments. Consequently, dividends can help increase your investment portfolio.
- Diversification. As already mentioned, there are 2,800 shares on the NYSE and about 3,100 on the NASDAQ. Thus, investors can invest in different investment sectors and stocks and diversify their portfolio. Even if one sector loses its value, profit from other sectors can help to cover the costs received.
See also FORTS brokers rating for futures trading.
Given the advantages provided by Forex and the stock market, we can conclude that choosing the best market completely depends on the type of trader / investor you are. We have listed the benefits of both markets. You decide which market works best for you.
Read also the article “What is an IPO, and how to participate in an IPO?”.