Advantages of Forex Trading over Stocks

While most people are familiar with the concept of investing in the stock market, it seems as though few people are familiar with trading currencies on the foreign exchange, commonly referred to as Forex. Because this is a highly volatile market those who do take the time to consider the possibility of Forex trading probably are questioning the advantages of Forex trading over stocks.

There really are quite a few advantages if you are a person who likes to experience a lot of action in a relatively short period of time. This type of trading is great for a person who is impatient. Even so, there are certain types of Forex trading which require not only skill but patience as well. A perfect example of this is Forex grid trading. The top two advantages of Forex trading over stocks would probably be that the market trades around the clock and that market information is readily accessible.

Forex Global Trading Around the Clock
The Forex market is referred to as being seamless, or near seamless, because it operates around the clock for six days out of the week. Therefore, the Forex market opens on Sunday in Wellington, New Zealand at 8 AM local time and from there around the world in hourly increments as their markets open for the business day. The Forex market then closes at the end of the business day (5 PM) New York local time. Although it is said that the Forex market is open six days, it is really closer to 5 1/2 days in any given market.

That being said, because of the overlap, any given market area can actually trade six days out of the week. For example, since the market opens Monday morning in Wellington, New Zealand which is really 5 PM Eastern time here in the states, trading can begin electronically in New York at 5 PM on Sunday and not close until 5 PM on Friday. Anyway you look at it it’s five days and 12 hours out of the sixth day.

Abundance of Easily Accessible Forex Market Information
Another of the major advantages of Forex trading over stocks is the fact that there are actually only six major currencies to be concerned with when following information on market activity. This is unlike the stock market which entails following thousands and thousands of stocks. Another disparity is in just how quickly the valuation or devaluation of any one currency takes place.

While it is true that the value of currencies are dependent to a significant degree on the stock market, the value of currencies rise and fall much more quickly than the values of stocks and other commodities. Although this is seen as an advantage to the seasoned Forex trader it can also work to your disadvantage if you are not on your toes while watching the trends. Because everything happens at just about the speed of light you really need to keep a handle on market activity.

Of course there are other advantages of Forex trading over stocks such as the fact that many transactions don’t require paying a brokerage commission since compensation is paid on a bid/ask spread. Also, the Forex market is not as susceptible to fraud as the stock market since there are very few private transactions which can affect the valuation of currencies. All information is disseminated publicly from research institutions and/or governments and is released globally at the same time electronically. And finally, perhaps one of the best advantages of Forex trading over stocks is the fact that private investors do not need a huge initial outlay of capital to get started in trading.

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