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Forex and stock comparisons all over the net are going to show the benefits of selecting to trade in currency exchange. Of course if you’re looking for long term investment then that is another thing, except for speculative traders the currency exchange has many special features that make it particularly tasty. Here are the top five reasons for choosing forex trading over stock trading.  

1. Twenty-four Hour Market

One practical advantage of the foreign exchange market is that it is open for trading 24 hours a day Monday thru Fri.. This is as of the worldwide nature of the market and the proven fact that it is always business hours somewhere in the world, excluding weekends and holidays. So a forex trader can work a real job and trade in the evenings or early mornings.

2. Liquidity

Currency is liquid obviously, if liquidity measures the ease of converting an asset into money. More frequently it is taken as the quantity of money in a market. On this, too, currency scores very high.

Turnover in the forex market was nearly $4 trillion per day on average according to a survey by the Bank For global Settlements in December of 2007. It has probably exceeded that now.

This is significantly more than is traded on all of the stock exchanges in the world added together. In foreign exchange you aren’t restricted to trading in your own country or on your own country’s currency, so the benefit to this trader of being part of this huge market is clear. You have a much better possibility of getting the price that you see or the price that you want.

3. Openness

an additional benefit stemming from the sheer amount of cash in this market and its high trading volume, is the openness of the market. There’s very little opportunity for insider trading in a market which deals with the economic performance of whole countries and involves each major financial establishment in the world. This means that the retail trader isn’t off balance to the limit that might be true in the stock market and lends more weight to our forex stock discussion.

4. Leverage

Leverage is the trader’s most essential tool in that it permits a tiny fund to control a huge position size, resulting in a big proportional return on investment, assuming that you are lucrative. The leverage offered by forex brokers is higher than in stock trading.

In foreign exchange, one hundred times leverage is seen as standard or low, 2 hundred times is common and 400 is possible in some circumstances. Of course this makes forex trading extremely risky but for a successful trader it’s a serious advantage because it means more money can be made from less.

5. Trade Both Directions

When you trade foreign exchange, you’re frequently working with a currency pair, exchanging one currency for another. This means that you can trade in both directions. For example if you are trading EUR/USD, you can start by making an investment in either Euro Bucks or US greenbacks depending on which one you think will rise. So you can buy or sell the pair ( go long or go short ).

In a way this is like trading stock options or futures, but with more suppleness. The flexibleness comes from the indisputable fact that currency values are relative to each other. They cannot all fall at the same time, as stocks can. So this is another point for currency exchange in the currency exchange stock comparison.

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Understanding foreign exchange trading and how it works is step one when making a decision whether this might be a way that you could earn cash. There are lots of attractions to the idea of currency trading as a form of investment, the main one being that it is feasible to make relatively high profits in a short time, compared with most other kinds of investment. However, the 1st point that must be made is that it carries a major risk, and nobody should jump in and start trading without understanding how the market works.  

Foreign exchange trading is a technique of earning profits by purchasing world currencies that rise in price, or selling those that fall. Of course, envisioning the increase and fall is where the talent comes in. If the price moves the opposite way, you’ll lose. For that reason some folk compare it to gambling. The difference is that in FOREX trading you are investing in an asset that is worth something. The public often fails to see the difference, and this can cause a lot of misunderstandings about foreign exchange.

Currency exchange basically means foreign-exchange, so foreign exchange trading is the same as currency trading. You’ll also see it shortened to FX or 4x. It’s a global market involving all the world’s currencies. Trading always involves exchange, because currencies can only be purchased and sold using other currencies. So traders are constantly exchanging one currency for another.

However, they don’t actually take delivery of the currency that they buy. Instead they are dealing in lots which they will trade out (exchange back) after the price has moved. The major part of the two trades will cancel each other out and what is left will be a profit if the price went the right way, or a loss if it did not.

Obviously it is vital to have a system that enables you to research the market and know when to trade, and in which direction. There are plenty of different systems and strategies for foreign exchange trading. It’s best to select one to start, and work with it till you understand it comprehensively.

You can do this in a demo account where you don’t have to use real cash. Then if it is working for you, that’s’s great. If not, it might be time to look for another, but you will have the advantage of understanding the market and your own wants much better through the experience of trying out the 1st currency currency exchange trading method.

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