Friday, 8 January 2016

Investment in Forex Or Stocks which is better?

Trading Forex 

Modern-day financial market and investment world provides investors and traders with lots of variable trading and investment options to choose from. Individuals are, thus able to choose either to trade or invest in well proven blue chips, businesses, futures or forex. Choosing which among these divergent markets to trade and invest on is a bit complex. We have thus provided in this article essential things that you must consider to guide your decision.

Risk acceptance

The first thing you must consider is your risk acceptance factor and your proposed trading style. If you’d be interested in buy-and-hold investment opportunities, the stock market would be a preferable option for you. On the other hand if you’d be interested in short term trading like swing trading, day trading and scalping; forex market which is more volatile would be the best option for you. You will find below differences between investments in forex, blue chip stocks, indexes and industrials.

Why You Should Consider Forex:

You can get into the market swiftly and with much ease

You can trade forex even without prior financial background or any form of special training. Again, you can start trading with demo account and only invest real money when confident. A forex account can be opened with just a few dollars!

With Forex trading, you have the flexibility of trading on your own terms 

The Forex market is accessible 24 hours a day, 5 days a week, and can be accessed from the PC or mobile device anywhere and anytime. 

Forex market opens up windows of opportunity

More than 4 trillion dollars are traded on the Forex market daily. Even a minute bit of the pie can go a long way. Forex trading, nevertheless, involves significant risk.

You always have a chance to come out on top

In the Forex market, you can trade various currency pairs which means you have many alternatives to choose from. You can decide to trade on a different currency pair if the currency pair you are trading on is falling. 

Comparing investment in Forex and investment in Blue Chips

The forex market is the broadest financial market globally. It roughly accounts for 4 trillion dollars standard daily traded value. A lot of traders and investors are attracted to the forex market because it has high liquidity value; it can be traded round the clock and because of the fact that it offers high leverage value.

Blue chips are stocks from confirmed, long-established and financially sound companies. Blue chips stocks are usually able to operate gainfully during tough economic conditions. They are well known for payment of dividends. Blue chips are by and large taken to be less unstable than lots of other investment options and are frequently used to supply stable potential expansion and intensification of the portfolios of investors. 

Volatile and unstable nature of the markets

Market instability is the estimation of short-term price fluctuations. While a few traders, mostly short-term and day traders depend on market on instability to make gain from sudden price sways in the market, other traders are more at ease with less unstable investments with less risk. Thus a lot of short-term traders prefer forex market to blue chips stock while long term investors prefer investment in stocks.

Leverage offered by the market

Another factor to be taken into consideration when checking which one is best for you is leverage accrued to you. The stock market in US OFFERS investors leverage of 2:1 while the forex market offers investors much higher leverage of roughly 50:1. Some parts of the world offers forex investors even higher leverage than that.

However, although this high leverage offered by forex undoubtedly catalyses the creation of equity with a very meager investment, leverage on the other hand can constitute a problem that may easily damage a trading account. Leverage can thus build and destroy. It serves as a double edged sword.

Trading Hours

Another thing to consider before choosing a trading instrument is the trading hours of such instruments. Stock trading sessions occur only during the exchange hours, which are usually from 9:30am to 4pm Eastern Standard Time, 5 days a week (Monday - Friday) excluding market holidays. 

Forex investment 

The forex market in contrast, functions round the clock. It is usually open from 5pm EST Sunday to 5pm EST Friday. It first opens in Sydney and from there moves round the world to Tokyo, London and New York. The forex market is a bit more flexible. The traders can either trade the U.S., Asian and European markets, with enough liquidity. The opening of the market 24 hours a day makes it suitable for traders who would have been unable to trade due to their day to day schedule. 

Forex/ Indexes

Stock market indexes are related stocks which have been amalgamated to be used as a yardstick for a specific portfolio or the wide market. Key indexes in the US financial market are: the Dow Jones (DJIA), the Nasdaq, the (S&P 500) and the Russell 2000. The indexes make available to traders and investors essential method of judging the movement of the general market.

Deciding whether to trade stocks, Forex or futures often depends on your risk tolerance, your account size and convenience. If you are not available to trade during the regular market hours, you’d rather not trade stocks. On the other hand, if your intention is to buy and hold stock for a long term, generating stable growth and receiving dividends, stocks would be a preferred choice. Whatever choice you make depends on which is most suited for your peculiar situation.

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