Here’s Why You Should Trade Forex over Stocks
The Forex market is the largest financial market in the world, with an average daily turnover of more than $5 trillion. That’s more than the stock and bond markets even combined! A growing number of traders are attracted by this exciting market every day, and now we’ll show what they see as the main advantages of trading Forex vs. stocks.
Number 1: The Forex market is open around the clock.
Unlike the stock market which follows the open market hours of a stock exchange, the Forex market is a decentralized market where currencies are traded around the clock in a number of financial centers worldwide. The main Forex trading sessions include the New York session, the London session, the Sydney session and the Tokyo session. Each of these sessions are located in different time-zones, allowing Forex traders to open, manage and close their trades 24 hours a day.
Number 2: There are only eight major currencies vs. thousands of stocks.
You’ve read it right, there are only eight major currencies in Forex! Compare this to thousands of stocks on the New York Stock Exchange, and you’ll notice that it’s significantly easier to follow important news and market developments for a few currencies than for a large number of stocks. You’ll not miss as many trading opportunities as with stocks, and can have more time for other activities beside trading.
Number 3: The Forex market has extremely low transaction costs.
Being an over-the-counter market, there is no centralized exchange that charges you fees for opening trades. The only cost you’ll face is usually the spread of your Forex broker, which is the difference between the bid and ask price for a currency pair. On the most-liquid pairs, the spread can be as low as 1 pip, and most of the brokers don’t impose any additional fees or commissions on opening a trade. This is a major advantage of Forex compared to stocks.
Number 4: It’s almost impossible to influence the Forex market.
The size of the currency market makes it almost impossible to influence exchange rates to a noticeable extent. Even large banks, hedge funds and other big players have not enough power to move the price of a currency with their multi-billion orders. Compared to the stock market where insider trading used to be a common practice in the past, you can rest assured that there’re no dark forces involved in most of the regular exchange rate moves.