About Lesson
Currencies vs. Stocks:
Let’s take a look at the advantages of the Forex market compared to stock markets:
- Note the enormous difference between Forex and stock market volumes. While the media prefers to cover stock markets such as NASDAQ and NYSE, these markets are tiny compared to the Forex market (which is 10 times larger than all the stock markets in the world put together).
- Think briefly about stocks and goods: let’s assume you decide to trade stocks. The variety of stocks is so ridiculously large – on the NASDAQ alone, there are almost 4,000 companies registered; on the LSE (London Stock Exchange), there are another 2,000 companies! How do you figure out which stock to choose? You can get a headache even thinking about it! Forex is much simpler – there’s just a handful of main currency pairs to choose from.
- While stock markets close down every afternoon, the Forex market is open 24/5. There are many advantages to this, such as immediate order execution. The Forex market is also much more reactive to dramatic events than stock markets because continuous trading hours allow traders to respond instantly. There is no room for surprises or massive reactions following dramatic events outside trading hours (as can be the case with stocks). Reactions are always in real-time, live.
- No force can manipulate the market. Brokers and financial companies cannot control the market by raising and reducing the commissions we have to pay to activate our positions. Bottom line – traders do not pay fees.
- As opposed to stocks, in Forex, you can earn money in falling markets. It is very simple – whenever the value of one currency in a pair goes down, the value of the second currency goes up! To be precise, it is possible to profit from impairments in the stock market by selling and buying “shorts”), but we relate to natural market conditions without manipulations. Remember, a constant “struggle” between the 2 currencies making up the pair. Selling one instrument means buying the other.
Let’s summarize the major advantages the Forex market has over the Stock market:
Stocks | Forex |
Big | Gigantic |
Hard to follow (complicated rules) | Easy to understand |
Open during working hours | Open 24/5 |
Able to manipulate | Huge earnings potential |
Transaction Fees | Free of charge |