Forex Versus Equities
If you are an investor and looking to invest your money in either the forex or equities market, hereunder are several reasons why it will be to your advantaged in investing with the foreign exchange market rather than with the equities market.
Non-Stop Trading
While the equities market has a limited number of trading hours, the forex market can boast of a non-stop 24-hour daily trading. Active traders around the world buy and sell foreign currencies on an ever continuing basis, night and day. These trading are done through telephone lines, electronic communication systems and the heavy bulk of which are now done through high-speed DSL Broadband internet. Thus, if you want to buy or sell foreign currencies, you can be sure there is always a ready seller or buyer because of the overwhelming hugeness of the market day or night. Added to this is the reality that because you do your trading in real time, any breaking news anywhere in the world will enable you to immediately respond since trading is done in a continuing basis worldwide unlike the equities market where traders and investors cannot immediately respond to any worldwide happenings because they are limited by time.
The Most Liquid Market
When it comes to liquidity and you compare Forex Vs Equity, then we can honestly say that you can forget about it, since there is no point in comparing the two markets in terms of liquidity. Forex is a very huge market without borders and operates non-stop, while equity market has a central trading location and operates only during trading hours. On this respect alone, you can already determine why there is no point of comparison between the two in terms of liquidity. The inherent liquidity of the forex market helps in stabilizing the pricing stability of the world’s currencies more specifically the 5 major currencies that are the ones most traded.
Buying Power Through Leverage
In equities market, the most that you can get in leverage is 2:1. Forex offers leverages of even more than 100:1. You can easily have a trading position of $100,000.00 with just a cash outlay of $ 1,000.00 . To make good in foreign exchange currency trading, you have to utilize leverages Offered by your broker, considering that the average fluctuation of the most traded currencies of the market is actually less than 1%.
Lower Transaction Cost
Trading in equities involves paying commissions and other related fees. in forex currency trading, there are no commissions and other fees. In terms of spread or the difference between the bid and the ask price, the forex market normally charges or imposes a spread of 3 to 4 pips. ( the equivalent of 1 pip is 0.0001 cents ). These average spreads are maintained no matter how big or small the transactions are.
Potential For Profit, Both Ways.
Unlike in equities market, a trader in foreign currency can be short(sell) in a currency he feels will depreciate in its value and then goes long (buy) in another Currency he feels will have a value appreciation. Thus, he profit both ways from a rising and falling market.
