Accumulating wealth and reaching financial satisfaction are common goals that any individual has. Accessing the right opportunities to increase your regular financial gains demands sufficient research from your part, as well as attention to detail. One of the options you should consider is becoming a trader. However, when it comes to trades, there isn’t just one market that comes with appealing characteristics. Because your choices here can influence your future success and how much you will actually make as a trader, you should familiarize yourself with the topic, before going in one direction or another. Stocks and Forex might have both caught your interest, but which one of these two markets actually suits your objectives best, keeping in mind that you are in fact a novice? The following pointers will help you reach a conclusion, and decide what you should be trading in the near future:
Let’s start with the aspect that possibly stands as most appealing for those who are just starting out in the world of trades, and that is schedule availability. Because you are just discovering these markets, you probably want to combine trading with your current professional activities. Managing to pursue this path, without having your trades interfere with your current schedule isn’t always easy, at least not if you choose to explore the stock market. Trading stocks is possible during business hours only, which can come as an inconvenience, if you have to attend to other responsibilities during that time of day. Forex on the other hand, is open 24 hours a day, Monday through Friday. This means you can engage in trades whenever you have some spare time on your hands. This is possible because the market is not tied to a specific geographical area, meaning round the clock possibilities are always available. However, keep in mind that not all hours are ideal for trades, you’ll need to figure out when the market is most active.
Transaction fees and commissions
You don’t need to be an expert in stocks to know that you are usually subjected to transaction fees during your trading actions, and stock brokers require different commissions. Being obligated to share your gains is of course not appealing, but with Forex, this will not be something you need to worry about. Forex brokers do not charge any fees or commissions on transactions, their compensation being made through the bid/ask spread. This means the costs of trading currencies are usually kept to minimal, and the majority of the gains remain in your own pockets. Of course there are cases where you might deal with an unreliable broker that isn’t transparent in regards to spreads, so if you decide to actually enter the Forex market, you should first consult a list of forex brokers for US traders, and find out which brokers are the safest to use.
Statistics show that the volume of daily Forex trades can be even ten times larger than the combined volume of all stock markets in the world. This clearly illustrates that the Forex market benefits from high liquidity. The numbers mentioned in various global results make Forex the most liquid market in the world, aspect that cannot be neglected when you are trying to decide which trading direction to choose. Liquidity is also directly linked to low margins – in the stock market, it’s impossible to find margin rates as low as in Forex. The reason for that is that stock traders are obligated to have somewhere around half of their investment value in their trading account at all times, whereas Forex traders can have as little as one percent.
Perhaps you are interested in the type of trade that can follow a fast pace approach, and Forex is the option that can provide you with exactly that. Because this market completes so many trades on a daily basis, you will have rapid access to a wide range of opportunities. Investors that are interested in short term investments, preferably with quick turnarounds, will always choose Forex over stocks, considering the volatility status of this market.
You couldn’t possibly reach an optimal conclusion here without taking into account leverage. In the US, for example, traders usually have access to 2:1 on stocks, whereas within the Forex market, leverage can reach up to 50:1. The difference is a substantial one, and this aspect drives the interest of some traders in the first place. While high leverage isn’t always a positive thing, it provides you with the opportunity to build equity with a rather small investment. This means, if you want to open a Forex trading account with as little as 100 dollars, you have the possibility to do exactly that, something you can’t say about stocks trading.
Understanding how trades work
Last but not least, before you actually start trading, you need to be aware of the instruments available and how the exact process of trading needs to develop. Another powerful aspect that often gives Forex a leaping advantage over stocks is that the trading process involved can be easier to understand by beginners. Once you do a bit of research, learn the lingo and find yourself a trustworthy broker, you can immediately proceed with your first trade. As long as you have some knowledge on the currency pairs you are planning to trade, getting around the trading tools you need to use won’t be hard.
There are various details that need to be addressed, when you are trying to decide whether to trade Forex or stocks, but once you look into the subject, you won’t need much research to conclude that the Forex market does come with increased potential. With higher leverage, trading hours flexibility and being less complicated to learn, Forex trading should in fact be the option you consider first, especially as a beginner. Managing to reach success in this domain could take some time, but the profitability opportunities available are highly appealing, making your involvement worth it.