First of all, what is Forex? It is a short version of FOReign EXchange. It is also called FX and 4X, but regardless of the name you use, it is the largest financial market in the world. From 1997 to the end of 2000, daily Forex trading has skyrocketed from $5 billion to over $1.5 trillion..
For those who do not know any better, knowing the difference between forex and stocks might not be so easy. What most people know is that stocks and forex have within them the opportunity to make loads of money.
Stocks
Before we descri
be what are the
benefits of FOREX, lets remember what a
re Stocks. Stocks have been a popular investme
nt for hundreds of years. Companies issue
stocks to raise capital for expansion and new projects, and each share of the stock represents a parti
al ownership in the company. Basically speaking, when you buy stocks you in
vest in the comp
any and in the market it is working in.
Hence, when the company does well and makes a profit, the value of the
stocks rise and you can sell your shares for a profit or hold on to the stock fo
r even more gain in the future. Sometimes companies will issue dividends
– part of the profits that are distributed to sh
are holders, ano
ther way for you to make a profit.
Stocks are trade
d on Stock exchanges. Most stocks are bough
t and sold through BROKERS (agents) who ch
arge a commission or fee for this service. Ame
rican stock exchanges include the New York Sto
ck Exchange (NYSE) and the National Association of Securities Deale
rs Automated Quotation System (NASDAQ). Most stocks are only listed on one
exchange, although large companies may
have listings on several exchanges.
Stocks were traditionally seen as long-term investments. So-called 'blue c
hip' stocks - those having proven value ov
er many years - may form the backbone of an tportfolio. Short-term trader
s (Day traders) exist, but it is a relatively new ph
enomenon made possible with the advent of Internet trading. Day traders attem
pt to take advantage of large daily fluctuations in the market by buying and s
elling many times in one trading period. It is relatively risky and broker commissio
ns charged on eac
h transaction reduce any profits realized.
Stocks may sometimes be bought on Margin, meaning that the investor borro
ws money to buy the stocks. Margin rates are usually around 50% - the investo
r can borrow as much as half the value of the stock.
FOREX
The Foreign Exchange Market (FOREX) is quite different from the stock exchan
ge. In contrast to the stock exchange, the FOREX is primarily a short-t
erm market. Most traders enter and exit deals within a 24-hour period – sometim
es within a few minutes. Many FOREX trades can be made in one day without b
uilding up a large brokerage fee because FOREX trades are commission free;
hence, you keep all of your profit. Brokers EARN MONEY by setting a sprea
d – the difference between asking and selling prices.
FOREX is the larg
est financial market in the world. It is handles transactions worth $1.5 trillion
every day ($1,500,000,000,000). By comparison, all th
e American stock exchanges combined handle daily transactions worth
about $100 billion ($100,000,000,000), 15 times smaller than FOR
EX. It is not located in any one location, but in th
e virtual space of the Internet. Trading markets are located world-wide and be
cause of difference in time-zones trades can be made 24 hours a day, 5
days a week. Trading begins in
afternoon
op until Friday afternoon
The huge volume of FOREX and its around th
e clock availability, means that it is one of the m
ost liquid markets in the world. There is always a buyer and seller for any type
of currency because the world economy relies on the movement of goo
ds from country to country. Stock exchanges have more limited trading ho
urs. While it is possible to trade on exchanges worldwide, each exchange is indep
endent and operates for just 7 hours a day. There is no way to buy or sell a certa
in stock that is only traded on one stock exchange when that exchange is close
d.
FOREX has even more advantages comp
ares to Stocks: It is more predictable than s
tocks, it follows well established trends, it allows high leverage – typically 100:1 in
stead of 2:1 on the stock market; and it doe
sn't require a larg
e investment – mini accounts as small as $250 can get you started in FOREX
.
The big question i
s what is Best for
you? Are you looking for a Day-Trading constant activity, with its advantage
s, or a long-term investment. Know the answer and you know the nature of you
r next investment.
The Forex market has a lot of advantages comp
are to stock market:
1. A Forex trader could make profit through the market no matter if it is bearish and bullish which is different from the capital market, Forex has no strict regulation in speculation, no matter whether it is a long-term or a short-term transaction there is still a hidden profit, moreover, Forex market is a double-transaction market which means Forex traders could make profit through both upward and downward trend.
2. Forex traders could obtain a much larger transaction compared to the stock market, through the Forex trading, Forex traders could obtain 100 times larger transaction compared to the stock market. According to the present
3. Forex trader may make profit from the ordinary news, like the interest rate change, Forex market is closely related to various countries' politic, economy and culture, Forex traders could also obtain profit from other kinds of news, for example interest rate level change, will influence the interest of the Forex deposit.
4. Forex traders could do 24 hours trading. The stock market can only be traded during daytime at a specific time, generally from
5. If a trader analyze based on technical analysis, Forex trading would be much more suitable for such traders because the Forex market has a very large trading volume. Currently the Forex market has daily trading volume of 190 billion Dollar, such giant market will completely digest a fore trader's transaction cash, under such situation the accuracy of the technical analysis would be much higher then any financial market, the chances of using technical analysis to make profit would be much more higher.
6. In the stock market there are hundred and thousand kinds of stocks, then choosing stock will be a very difficult matter. But in the Forex market, the currency combination is extremely limited, this may enable Forex traders to concentrate on these currencies combination, and could follow the trend quickly.
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