Forex vs. Stocks - Advantages of Forex Trading

Are you interested in branching out into forex trading, but are wondering how it differs from the stock market? This is an excellent query, and this currency exchange offers specific advantages over other options. It is open for trading around the clock, has low to no commissions, boasts immediate trade execution, the ability to short sell with no restriction, has no middlemen, is difficult to influence and is nearly impossible to corner.

Further, the best forex platforms are arguably more robust than comparable software for stock trading. For all of these reasons and more, forex trading can be a profitable strategy. To help you determine if this market is right for you, let's examine these benefits in more detail below.

More Concentrated Focus

The stock market has somewhere around 4,500 individual stocks on the NYSE and nearly 3,500 more on the NASDAQ. This gives you a huge potential pool to choose from, and becoming knowledgeable about this area can be an imposing challenge. After all, how will you select which one to buy or sell, and what criteria you will use? Also, market research will take up a significant portion of your time, leaving less available for actual trading.

In contrast, the forex market offers only several dozen currencies instead, and most of the action is centered on a few high profile items. With much less options to pare down, you can concentrate your efforts for a more successful outcome! You can further elevate your advantage by selecting one of the best forex trading platforms available today, which will help you keep tabs on each market movement.

Open Around the Clock

When looking at forex vs. stock market, another feature of this currency exchange is beneficial. It is open around the clock, and most brokers are available Sunday through Friday as well. If you have a technical problem, their customer service can typically be reached 24/7. Whether you want to invest in European, Asian or US markets, you will have the opportunity to do so. In fact, this makes forex the clear winner if you trade only part time, perhaps in the evening after you get off from work.

Low to No Commissions

Unlike the stock market, the majority of forex brokerage firms don't carry fees or commissions for trade execution. In most cases this is true whether you are trading by phone or online. If brokers don't charge anything for their trades, how do they earn a living? They typically make money off of the divergence between the bid and ask price. This is good news for you, as it means you won't directly be paying a commission, which can represent a significant savings! This feature is especially attractive if you're just starting out, and don't have a large budget to work with.

Immediate Trade Execution

Forex trading is nearly instantaneous, and in most cases your order will be executed immediately. Why is this beneficial? When you decide to implement a trade, the price which is currently displayed is what you are after. However, with some exchanges you often get a slightly different price, as the market moves while your order is being completed.

While automation in the stock market has helped to alleviate this problem, trading on the forex is lightning fast. The majority of the time you will get the price which you see at the time of your trade. You can further streamline this process as well, by using the best forex trading platform you can find, which will make executing your orders even easier.

Short Sell With No Limitation

Some markets limit when you can short sell, with some like the equity market requiring an uptick in price before you can do so. They've implemented these rules to stave off sharp declines in price, yet this will constrict your choices. The forex doesn't impose these types of regulations, and no matter which way the market is moving, you can buy or sell anytime.

It Is Difficult to Influence

Certain companies on the stock market are easily influenced, such as those with very low market capitalization. Often termed penny stocks, these can be swayed by a relatively moderate amount of money being invested. Also, when commentators put forth their recommendations, these can move the price artificially as well. While large cap stocks are less vulnerable to this type of effect, it can happen on a low scale in their value also.

In contrast, analysts specializing in the forex market have little to no influence on its prices. This is determined by much larger factors, such as huge corporate banks need for certain currencies or to hedge inflation risk.

No Extra Fees From Middlemen

The highly concentrated exchanges of the stock market do have some benefits. However, they also allow middlemen to be present, and in the end this will cost you more out of pocket. They will charge a commission or transaction fee for each trade you execute, and over time this can add up.

The forex market stands in stark contrast, as it is handled by a vast network of different brokerage houses. This means no central location controls all the action, and you work through individual brokers instead. This situation is highly beneficial, as they are always trying to win your business. They do this through slashing their prices, and you pay less as a result! How can you ensure you get accurate quotes, with this patchwork of firms giving out prices? One method is to obtain the best forex trading platform you can, with a reputable source for its information.

Final Analysis

So, if you've been on the fence about whether to pass over the stock market in favor of the forex exchange, the above factors can cement your decision. Forex trading is open around the clock, charges low to no commissions, features immediate trade execution, includes the ability to short sell with no limitation, is difficult to influence and has no middlemen. For all of these reasons, this exchange is an excellent option and one which you will be well served to consider.

To further enhance your advantage, use a brokerage firm which provides the best forex trading platform you can locate. When you do so, you will be able to trade with little or no upfront fees, and get an accurate data feed as well. So, why not make the switch, and start trading in the forex market today?