Forex Trading vs The Stock Market

Trading currencies on the foreign exchange has quite
a few advantages over trading stocks.

1. A 24-hour market.
The foreign exchange is open for business twenty-four
hours a day. This is a major plus for small investors
who are starting out trading in their spare time.
Rather than having to juggle your schedule around
your trading opportunities, you can schedule your
trading when its convenient for you.

If you're a night owl in Manhattan and want to trade
at 1:00 AM, no problem. Banks in Tokyo are open.

2. Low Transaction Costs.
Forex brokers are not paid by traditional
commission-based fees, and there are no hidden fees.
The broker's fee is built directly into the trade in
the form of the bid/ask spread. In simple terms, the
spread is the difference in what you would buy a
currency for and what you would sell it for. The
spread is expressed in "pips".

3. Leverage/Margin.
The ability to trade on margin gives forex traders
significant leverage in their trading and offers the
potential to make extraordinary profits with relative
small investments. For example, with a broker that
allows margin of 100:1 you can purchase $100,000 in
currency with only a $1,000 deposit. Of course,
leverage goes both ways and can lead to large
losses if you are not careful.

4. High Liquidity/Fast Trade Execution.
When you trade in currencies you are trading in cash.
There's no investment more liquid than cash, so trades
are executed near instantaneously. There's no sitting
around waiting for your trade to execute.

5. Not Easily Influenced.
The foreign exchange market is so incredibly huge that
no one individual, fund, bank, or government entity can
influence it for long. This is the opposite of the stock
market where one television analysts negative appraisal
of a company's stock could send it into a tailspin.

6. A Small Sample to Study.
There are thousands upon thousands of stocks available to
trade. Large companies, small companies, international
companies, newly issued IPOs. Its just not possible to
follow them all.

In forex trading, there are only seven major currencies
to follow, so you can devote a lot more time to each of
them. And there are many successful forex traders who do
not even trade in all seven major currencies. Some just
pick three or four and stick with them.

7. No Bear Markets.
Since you can trade either short or long, you can make
money whether the prices go up or down (assuming you guess
correctly).