The Differences Of Trading In Stocks And The Currency Market ...

Forex Trading

The Internet has opened doors for people around the world to trade and invest in a convenient manner in a growing variety of markets. Case in point, you can already do Forex online trading. Some people find that trading in the currency market is better than trading in stocks. Others feel otherwise. In this article, we will compare investing or trading in the Forex market to buying stocks.

One of the differences between the two markets is that Forex is much larger. Just last year, the average traded value for the currency market was around $4 trillion daily. The size of the currency market is probably because many people are attracted to its convenience, high-liquidity, 24-hour trading, and the amount of leverage available. Online Forex trading is convenient in the sense that you only have to focus your efforts on seven major currency pairs. If you trade in stocks, you would have to choose among 10,000 options to find one with the best earning potential.

Unlike in the stock market, you can take a short position in the Forex market even if the transaction is not at a price above the previous transaction. This makes the currency market very liquid. The market also remains active round-the-clock from 5PM EST Sunday, to 5PM EST Friday. In addition, Forex trading sessions overlap among different time zones and key trading centers, so it is possible to trade in different markets during the same session which makes it a great opportunity to earn additional income aside from what you make from your regular job.

As pointed out earlier, Forex trading online you can get a much higher leverage. In the United States, the leverage you can get when trading currencies can reach up to 50:1, which is substantially higher compared to the 2:1 leverage available for those trading in stocks. The high leverage available in Forex is also due to the high liquidity of the currency market. For more information about online Forex Trading please go here.

However, if you want to trade in the currency market, you have to be prepared for the market?s volatility. The price of currencies and their exchange rates are very sensitive to socioeconomic and political news. Currency pairs can also be affected by natural calamities like tsunamis and earthquakes. Traders with low risk tolerance may find trading in stocks better suited for them. Just the same, stock markets is more susceptible to trading volume and activity shrinkages than Forex. As a result, there may be instances when taking a short or long position is particularly challenging. Although Forex has higher volatility, one can still earn even if during declining markets.

Source: http://freefinancearticles.info/the-differences-of-trading-in-stocks-and-the-currency-market

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