Nowadays, to an ever-increasing number of trading instruments, including Forex markets, indices, and blue chips investors have access. So it is not always an easy decision to choose which market to trade it. For this reason, in order to make the best choice, a number of factors are needed to be considered by the traders.
Probably a trader's style of trading and their risk tolerance is one of the most important aspects. For example, markets, where the effects of price volatility are felt to a greater extent are preferred by short-term traders, whereas to trading the stock market long term investors may be more suited.
The Benefits of Forex over Stock Trading
There are many reasons why rather than "traditional" stock trading traders would want to look at Forex. These are as below:
Liquidity
As compared to the equity markets the currency markets having Forex brokers are much larger. As compared to the combined volume of all of the world's stock markets, the daily trade volume in Forex estimated to be as much as 10 times larger. This makes it very liquid market. Leverage is high and margins are low due to the high liquidity of the Forex market.
As in their margin accounts, the majority of margin traders need to have around half the value of their investment finding such low margin rates in the stock market is not possible. Meanwhile, an amount as low as one percent, is required by the Forex traders.
Commissions
As compared to the Forex market commissions in the stock market tend to be a lot higher. Traditional stock brokers charge fees that have to be paid to the exchange apart from commission fees on top of their spreads. To trade currencies online commission, additional transaction fees is not charged by most FX brokers.
Generally speaking, by means of the bid/ask spread the majority of brokers receive payment for their services and unlike in other markets Forex trading costs tend to be lower.
Short and Long Flexibility
Unlike with stocks, with ease Forex provides the flexibility to go short and long. Regardless of whether a trader is short or long trading opportunities exist with Forex, so in rising or falling market traders always have equal access to trade. Making it difficult to close and open positions when a trader would like to, resulting in declining activity and volumes, stock markets on the other hand can frequently hit a lull.
Furthermore, a stock market investor can make a profit in a declining market through extreme luck or dexterity. In both declining and rising markets Forex brokers in Australia offers the opportunity to profit, with every trade. At the same time a trader is selling and buying and thus, short-selling is a part of every trade.
Overall, for traders often preferring to look at Forex rather than stock trading there are many reasons. Quite simply, the benefits of stock trading are outnumbered by the huge benefits of trading currencies in the globally accessible Forex market. Ultimately, it is a case of a trader's risk tolerance and personal preference.
