Why Forex Investing is Easier to Trade Than Stocks
People seem to think that stock trading is the easiest form of trading and investment because you can almost leave it there and wait for it to go up, but the real picture isn’t quite as rosy.
In this article, we’ll explore the differences between forex and stocks, how you can do both effectively, and then explain why forex trading online is probably easier than you think and likely the better option compared to stocks.
So, what’s the difference between forex and stocks?
One of the most significant differences between forex and stocks is how they are both traded. Stock trading is the buying and selling of company shares that are listed on the stock exchange, while forex is the trading of different currencies.
Forex is traded in pairs, meaning whenever you buy or sell a currency, you do so with another, with each currency having its own value and worth when compared to other currencies on the market. Trading can be volatile, but there’s always clarity in the chaos.
An example of this would be when you buy USD/EUR; you would be buying US dollars and selling euros at the same time. The price would be for how many euros it would take to buy one US dollar.
One key difference between these two markets has to do with leverage. In the stock market, traders can only control a small number of shares with their investment capital because each share costs quite a bit of money.
In comparison, forex traders can control much larger amounts of currency with their investment capital because each unit is worth very little relative to the base currency being traded. That being said, greater leverage amplifies both gains and losses, so it should be treated cautiously.
How can you become an effective trader?
Now that we’ve covered some of the key differences between forex and stocks let’s take a look at how to trade effectively.
To trade stocks effectively, it’s a good idea to follow the entire market as one change can have a colossal knock-on effect and have a massive impact on the rest of the market. You can’t just dip your toe in stock trading; once you’re in, you’re in, and this is something that many people don’t seem to realize when they begin.
To trade forex effectively, you need to have a strong understanding of technical analysis and be able to identify patterns and forecast trends. You also need to have a good idea about the fundamentals of the trading and the currencies you’re trading, as well as be up-to-date on any news that could impact their exchange rates.
One thing that is common for both stock and forex trading is the importance of using risk management and having a clear exit plan. This means knowing how much capital you’re willing to risk on each trade and sticking to that amount no matter what while also knowing the best time to get out and protect your remaining assets.
So, which is easier? Forex or stocks?
While both forex and stocks can be traded effectively if you have the knowledge and discipline to do so, we would say that forex is likely the easier of the two, especially if you’re new to the game. We say this is because the forex market is open 24 hours a day, 5 days a week which gives you flexibility for when you can trade without drawing you in too much.
If you’re new to trading and investments, we would recommend starting with forex. In addition, both stock traders and forex traders need to employ brokers for a variety of reasons. Stock traders typically use brokers to support trading decisions, contact issuers for important information, and for the ability to buy large blocks of stocks. Forex traders also must employ brokers for similar purposes, such as having access to the largest pool of liquidity for orders as well as competitive spreads on different currencies.
However, there are differences that should be taken into account, particularly when it comes to searching for the best broker for US clients: for example, a good stock trader may not always provide the greatest service for those trading with foreign currency conversion. It is essential for forex traders to research what works best for them when selecting their broker.
Once you have a good understanding of how the market works and are making consistent profits, you can then consider adding stocks to your portfolio. It’s all about moderation, and we think that you can avoid feeling drowned and in over your head by easing your way in.
Why trade forex?
Now that we’ve answered the big question, let’s take a look at some of the reasons why you should consider trading forex. Now, this isn’t an exhaustive list that’ll tell you absolutely everything, but here we’ve compiled just a few reasons why forex trading might be for you.
One of the main reasons to trade forex is that it’s a highly liquid market with an active base of traders who know their stuff and are eager to move their assets for a variety of reasons. This means that there are always buyers and sellers available to trade with, and you’re able to enter and exit trades quickly at good prices. You can also follow news developments much easier as there is a very limited number of currencies, unlike companies.
Another reason to trade forex is that it offers high levels of leverage which allows you to manage large amounts of currency with only a small amount of capital needed. Leverage can come with its own downsides, which we’ve covered already, but it can be a powerful tool if used correctly and is something you should definitely explore.
Finally, another benefit of forex trading is that there is no central exchange, so you have 24-hour access to the market 5 days a week. This gives you much-needed flexibility in when you can trade and makes it easier to take advantage of opportunities as they arise. You can sometimes trade on the weekend, but this is rare, and we think some personal time is absolutely vital anyway.