Forex Trading Vs. Stock Trading
Trading forex or equity look the same from afar. Then again from 33,000 feet, Everest looks no taller than a Wycheproof, but everyone knows which one is the tallest mountain.
The same case can be applied to stocks (or equities) and forex. The mighty NYSE, Euronext, NASDAQ, and S&P500 look like mighty giants. Each holding the most powerful, wealthier, and influential firms in the world.
However, they also bolster close to 10,000 companies that stream from all walks of life. And that leads to the first big difference.
More options are not always better. Not when it comes to trading. Before you keep reading, don't be fooled. The forex market contains every single currency that exists in the open market. However, the most critical pairs are EUR/USD, USD/JPY, GBP/USD, USD/CHF.
Mastering the trade of 4 pairs will make any trader hugely successful. And that is without accounting the 3 commodities pairs. All and all, any forex trader must keep track at most of 4 to 7 pairs.
Compared that the potential 8000+ firms that could, at any point, break out and make you miss on a big payday. Yes, you can track the blue-chips and make your life easier. But how long are you willing to wait for $IBM, $DELL, $APPL, or $AMZN to overperform by 2%? That leads to the second advantage.
When trading commodities, you must wait for a moment to get a confirmation when closing or opening a position. Those precious seconds could be the difference between making an $800 or $1200 profit. Not in forex. Mind you that unless some extreme event is happening, you can execute real-time orders.
And in case you are left wondering what is considered an extreme event, think more asteroid destroying the earth and less heavy rain day. And speaking of what the market lets you do.
Like McDonald's, the forex market is open 24 hours from Sunday to Friday. That is all you need to know about forex. No more waiting pre-trade hours for the market to open at 9:30 EST if you are trading in the NYSE, or rushing to close a position before the bell rings at 16:00 EST.
That means that if you wake up in the middle of the night with an answer as to what to do with the EUR/USD position you opened that morning, you can do it that very moment. And all this flexibility leads us to the last point.
No external influence
The level of accessibility the forex market offers is unrivalled. That is because forex brokers offer little to no commissions to traders looking to get in. Most of the profits are made through the bid/ask spread. That means there low barriers to entry. Guaranteeing that no single fund, firm, trader, or influencer can affect the forex market. Only market forces move the prices.
At the end of the day, Everest, like forex, is a mighty mountain. But unlike the real thing, climbing the forex ladder is the simplest and most rewarding experience a trader could ever hope to accomplish.