Forex vs. Equities
Forex market offers several advantages over Equity trading, such as:
24 hours open market
The biggest advantage of the Forex market over the Equity trading is that of a
24 hours open market. Active 5 days a week, Forex market gives its traders what
Equity trading does not. Equity trading is restricted to regular business hours,
making Forex, the only incessantly moving trading platform.
Being a 24 hour trading market, there is always some investors, somewhere in the
world who are dynamically trading foreign currencies. This also enables these
investors to react to any breaking news of the market, immediately.
Higher trading volume
Also, the trading volume in the Equity trading or the major stock exchanges is
often 100 times lesser than foreign exchange market. Furthermore, majority
traders are willing to buy and sell currencies because of the need of various
countries, which want to continue to trade goods with each other.
No commission and transaction fees
Forex serves as a more cost-efficient trade as compared to Equity trading,
especially in terms of both commissions and transaction fees. Most of the sites
dealing with Forex trading do not charge its investors or traders with any
commissions or fees, while offering them, access to all the significant market
information required for trading purposes. But in case of Equity trading,
commissions range from $5 to $100 or more per trade in case of full service
brokers.
Price stability through superior liquidity
The trading volume of the Forex market being 100 times more than the New York
Stock Exchange, there are always dealers willing to buy or sell currencies here.
The superior liquidity of the major currencies also helps ensure price stability
in the Forex market. But this cannot be the case with the Equity trading which
has a lower trade volume. This can therefore put the investors of the stock
market to liquidity risk, resulting in larger price movements.
Higher leverage
Forex market offers higher leverage as compared to all the major stock exchange
trade markets. While the commonly available leverage from the online Forex
dealers is 100:1, the leverage offered by the Equity brokers is as low as 2:1
margin. Such high leverage enables the Forex traders to trade much larger sum of
currency than they have deposited. Also that depends on the types of Forex
brokers one considers for trading.
Profit Potential
Forex market enables its investors to trade on the upward as well as the
downward trends of the market, giving them the facility to buy and sell
currencies. This serves as another major advantage of Forex market over Equity
trading. This is because in the equity market, it is more difficult to trade
during downward trend of the market, due to some market policies. |
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