Many people who previously did not have the opportunity are now able to access the foreign exchange market. All you need is a computer and a stable, fast internet connection. This financial market trades in money. It is known as an interbank market because all the trades are usually done through large financial institutions and banks.
There are many investors who have traditionally traded on the stock market, but are now turning their attention to the foreign exchange market. One of the main reasons for this is that it is not necessary to have massive amounts of cash available to start trading. The initial investment capital for the forex market is much lower than in the stock market. A forex trader can commence trading with as little as $250 compared to the stock market where you require thousands of dollars. Bear in mind, the more money you invest, the higher your potential gain.
The speed at which you complete trades in the forex market is a distinct benefit. Investment in stocks is thought of as a long-term trade. Some investors retain their stock portfolio for years, but this is dependent upon the market and the type of stock. You are able to make short term investments in stocks, but this is not the normal procedure. In the currency market, traders generally do not hang on to their trades for very long periods.
Gains in the Foreign Exchange Market
Investors who are involved in stocks and looking to trade in forex are generally not of the intention to leave the stock market. The shift is simply for an additional income source. Many of these investors are no longer active in the stock market.
In the stock market, your broker earns his or her income by charging you a commission based fee. Forex brokers operate differently in that they add a percentage to the currency price upon sale to you. The profit you make in forex is yours as the fee has already been accounted for.
Many investors believe that the stock market is more difficult for trade than the forex market. The reason for this is that they believe patterns and trends are simpler to read and analyse effectively. The trading hours in the forex market makes it easier for newcomers to get a foot in the door. The foreign exchange market’s trading hours are longer than stocks and this makes it simpler to enter and exit your trades.
Safety of the Markets
The forex market, unlike stocks, is a decentralised market that is not very heavily regulated. This appeals to many investors as they can use any type of trading method. The freedom of trading also appeals to them, as does the liquidity of the market. It is possible to undertake insider trading in the forex market without recourse. The other side of the coin is that stock market investors feel that the forex market should be regulated to protect clients.
The differences between the two markets are very distinct and moving from the stock market to the forex market is often simple for investors. This is based on the idea that they are aware of some of the factors that could affect the currency rate and know how to read many of the charts common to both markets.
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