Last week I compared trading in options with trading in shares. There are four key differences and 3 are in favor of options (one is a disadvantage, but it is not a big deal).
Today I want to compare Forex with stocks. As you will see, the battle is already won: Forex wins 8 to zero against actions.
To better understand this article, you should have read the free ebook on Forex that I wrote. If you have not already read it, you can download it from here.
Today trading with Forex is fashionable, it is a hot topic. Brokers do everything for you because you start trading on their platform paying their spread. This is exactly why I created the first seminar in Italy about Forex. I want to give you the correct information compared to the misleading information that you often get from unreliable brokers and online courses. It is important to be cautious. But the advantages of Forex compared to actions are blatantly obvious.
It’s open 24 hours Monday-Friday
Forex is a continuously open market. It begins with Asia, then Europe opens, then the USA and when the US goes to sleep Asia opens again. This means that you can trade whenever it’s suitable for you (there are of course differences between markets, but not crucial enough to affect your success as a Forex trader).
Trading without commissions!
If you have already traded, you know that the issue of commissions is important. With actions and also with options you always have to take into account this cost. Not with Forex! There are usually no fees at all when trading with Forex. You might wonder how brokers earn their money. The answer lies in the spread. The spread is the difference between the buying and selling of currency pairs. But compared to commission fees it has a lower impact on your profits.
With stocks and options – and especially with commodities – you are influenced by liquidity and by market volatility when you place your buy or sell orders. In some cases you don’t even know exactly what the cost will be to complete your trade.
This doesn’t happen with Forex, at least it doesn’t happen with pairs of the most common currencies. Liquidity is always an important factor and your order is placed almost instantaneously. However, it is important to avoid stormy moments and currencies pairs that are not common.
Short a stock seamlessly
Do you want to short a stock – or sell without having the title counted – with your account in shares? The broker will do an X-ray, assuming that you let him do it (today it is even more difficult). But with Forex, you can buy or sell as you wish; for the broker it doesn’t matter.
This means maximum flexibility to gain money when the market goes up and when the market goes down.
No intermediaries or middlemen
The stock market with options is run by intermediaries. And intermediaries add in time and costs to the process: and you are the one who pays. In Forex there are no intermediaries or middlemen, brokers will simply connect to the market. There is maximum transparency and minimal waste.
No one can control the market
In the software of the stock market the principal “players” can actually influence prices by buying or selling large quantities. This is one of the reasons for the global crash because the computerized systems managed the trades. But this doesn’t happen with Forex: it is such a liquid and rich market that virtually no one can influence it even when buying and selling large amounts of currencies.
The stock market is greatly influenced by TV and newspapers. Forex instead is impervious to everything. It is really as close as you can get to a perfect market.
4 titles against at least 8000
I left this Forex advantage last but I consider it very important for people who are just getting started with trading. If you invest in shares or options, you have thousands (at least 8,000 shares on the American market) with which to trade. If you trade seriously, you must know this! There are thousands, or at least a few dozen titles when it comes to the stock market. And the same goes for options.
But with Forex you can concentrate on the 4 key currencies pairs(EUR / USD, GBP / USD, GBP / JPN, USD / CHF) or at least only on the fundamental (EUR / USA pair.
If you become good with the Euro / Dollar you can live through Forex. Imagine: you only have to know one “title” instead of dozens or millions!
As you can see, there are many good reasons why Forex trading is so widespread at the moment. If you study it with humility and passion you will quickly achieve your financial freedom. It’s a win-win situation.
Until the next appointment with your financial freedom,