Forex trading (also known as foreign currency exchange or fx trading) has grown to be popular among investors comparatively just lately, while stock trading has been around for a long time.
There are five benefits of foreign currency trading or Forex trading over stock trading
In the forex market, you can gain both ways, no matter if the market is bullish or bearish, compared with the stock market in which you can only make earnings when the stocks climb, as shorter selling is disallowed. Individual retail traders such as you and me, have similar possibilities to gain in a dropping or growing market.
The currency market has remarkable liquidity, with more than US$5.3 trillion price of currency being traded everyday. The forex market is often moving and you do not have to be concerned about not having purchasers when you want to sell, as there are billions of people who would like to trade with you. On the other hand, in the stock market, if you bet on the improper stock, you may have to keep your stocks for a comparatively long time, particularly for those less lively counters.
In the stock market, the highest possible leverage is 2:1. But when you trade foreign currency, you can have as much as 400:1 leverage. You can benefit hugely with a little bit of investment in forex trading. Of course, this incorporates a note of warning too, as this could signify that you might drop a lot of money too, if you are not cautious. Leverage is one of the most attractive aspects of the forex market.
If you are trading stocks, you have to pay out the commission payment of remisiers each time you buy or sell, but in forex trading, there are no middle men. Investors are capable of communicate directly with the currency market and conserve capital on commissions.
When you invest in stocks, you would have over 8000 stocks (varies between the stock exchanges of various countries) to select from, to invest your capital. It is hard to track and analyze the overall performance of numerous stocks. In forex trading, there are only six important currency pairs to pick out from, and you profit from the power of focus. If you have the ability to acquire the expertise of trading currency, skills in trading just two currency pairs could allow you to become rich as George Soros or Warren Buffet.
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Zita Zimande is a sports news journalist from the University of Johannesburg. Besides being a sports fanatic, she loves to cook during her spare time.