Why Forex Trading is Better than Stocks

Before investing, traders need to understand the difference between forex and stocks to find the best investment opportunities for them. These markets provide very different trading environments depending on the investors' aims. 

Ambitious investors looking for a quick profit and short-term investment option will discover it is best to trade forex today. Forex provides a unique market with only a few regulations that the more highly controlled stock exchange cannot compete against.   

What is the forex market? 

Forex, or foreign exchange, is the largest trading market in the world that deals with the exchange of currencies. Traders aim to make a profit from a short investment by predicting the price change of a currency pair. This means investors will trade with one currency to buy another base currency. 

There are 18 commonly traded currency pairs, but the most popular pairs are the Euro against the US dollar and the US dollar against the British pound. 

Forex is influenced by supply and demand, but can also be quickly affected by a country's economics, politics, and news reports, resulting in high volatility. This shows how vital it is to keep up to date with price trends.  

What is the stock market?

In comparison, stocks deal with the buying and selling of company shares. This market has fewer trades per day and a lower trading volume than FX but is generally considered the more stable trading option. 

Blue chip stock is the name given to industry-leading companies that are established with a reliable trading record. These companies usually provide the safest investment options, especially during times of uncertainty. Once investors move away from blue chip stocks, the market rapidly becomes less liquid.  

Shares are influenced by supply and demand but also the company's financial status, economics, and the health of the market sector, which all need to be taken into consideration when investing. 

Benefits of forex trading 

FX investments generally suit individuals wanting to invest short and can quickly provide big rewards. FX is largely unregulated and has a higher degree of flexibility for leveraging, making it an attractive market that all traders can easily access. 

Trading hours 

Forex trades 24 hours a day, 5 days a week, allowing traders more flexibility compared to stocks, which have set trading hours. FX investors like being able to choose the optimum time to buy and sell orders depending on which sessions are open. Especially as the market usually becomes increasingly competitive when trading sessions overlap. 

The only downside to 24-hour trading is that prices can change rapidly, so it requires close monitoring to ensure optimum buying and selling points are not missed. However, with the availability of automated forecasting, it is easy to keep up to date with any changes, saving investors valuable time. 

Liquidity 

Forex is the most liquid market in the world due to the volume of investors. It has a daily turnover of trillions of dollars. In comparison, stocks have significantly fewer trades daily. Even the larger blue chip shares cannot compete with FX. Foreign exchange liquidity is improved further when two sessions overlap as there is an increased number of traders speeding up transactions, making this an optimum time to invest. 

Image by Csaba Nagy from Pixabay
(Photo : Csaba Nagy from Pixabay)

Volatility 

Forex can be highly volatile as prices may change rapidly in response to a large volume of sales or unexpected economic or political events affecting one of the currency pairs. Volatility can influence the risk levels of an investment, so traders need to have a risk strategy. Orders with lower volatility provide lower risk but a lower profit potential.   

What makes forex the better investment option? 

Foreign exchange has a lot to offer investors as price changes are rapid, providing plenty of optimum investment opportunities and the potential to make a profit. In comparison, stocks usually require a long investment before any profits can be seen.  

FX used to be an investment option accessible only to experienced traders, but now there is new technology available to help everyone make their first foreign exchange investment. First-time traders can use comprehensive trading platforms for easy real-time investments, and copy trading is an excellent option for learning strategies and watching how experienced traders invest in FX. 

Photo by Nick Chong on Unsplash
(Photo : Nick Chong on Unsplash)

Forex profit potential

The forex market offers an unbeatable level of profit potential due to the volume of sales and volatility of currency pairs. FX can return frequent profits for short investments if traders remain focused to make the most of every investment opportunity.