Forex vs Stocks

When most people think of investing and making enormous profits from investing, the stock market is often the first thing that springs to mind. However, investing in stocks is not necessarily the safest, quickest or best way to increase one’s net worth.
Forex trading holds many advantages over stocks when it comes to realising the goal of financial security:

You Call that Trading on Margin?

As a rule of thumb, a stockbroker typically extends 50% margin, depending on the stock. This means that on a $50,000 order, the client must have at least $25,000 of funds in the account. Forex trading offers frequently requires a 1% margin and up to 0.5% margin. This means that to control a $50,000 order requires funds in account of anywhere between $250 – $500. This leverage is what enables Forex traders to quickly magnify profits from winning trades.

And What’s with Those Fees?

Due to the enormous volume of transactions, automation of the trading process and tight spreads, transaction costs for Forex trading form a minimal part of the trading experience and are generally substantially cheaper than those for trading stocks.

There’s Nothing Like Liquidity

With $5.3 trillion a day of Forex transactions, individual traders can transact in size without fear of influencing the market, confident in the fact that they will always find a counterparty to their trade. In 2013, the 10 largest stockmarkets in the world combined traded approximately $46 trillion for the year. In other words, the Forex Market trades in about 9 days what the stockmarket trades in a year. Add to this the fact that stock are traded in literally thousands of companies versus the 6 major currency pairs that comprise approximately 80% of Forex transactions. This means that liquidity can become very thin in the stockmarket – and usually at the worst possible times.

At All Hours of the Day and Night

The Forex Market is active 24 hours a day, 5 days a week. Due to the decentralized and global nature of the Forex Market, trading is compatible with any time zone. Although there are some stocks that trade on multiple exchanges, they are few and far between and even then they don’t trade 24 hours a day. When trading is there to be done, a market should be open.

How Short is Short?

Both stocks and Forex can be traded from the short side; however, Forex does not discriminate against short sellers, with the same margin requirement on buying and selling and the ability to short every Forex instrument, which is not always possible for all stocks.

Concentrate!

When trading stocks, traders have to sort through a lot of chaff to find the wheat, meaning that finding a good trading opportunity can be like finding a needle in a haystack. When trading Forex though, the concentrated choices always present a trading opportunity – either from the long or short side.

Transparency

Insider trading and market manipulation are almost exclusively associated with the stockmarket. The size of the Forex Market means that it is too big to be dominated by any one player and is consequently a transparent place to trade, free from manipulation and available as an even playing field for all participants. Similarly, market-moving information is usually the domain of government agencies which release this data publicly at pre-notified times ensuring that every market participant can compete on a level playing field as information leaks are rare and insider trading even rarer.

Tailored Trading Solutions

Leverage is a dual-edged sword. That’s why NSFX offers adjustable leverage options from 1:1 to 1:200. It’s up to the client and their risk profile as to how much risk they attain via leverage irrespective of their trading volume or account size. Similarly, trading with fractional lots, clients can reduce exposure and apply different trading strategies.

No Need to Crystallise Profits

When trading Forex, traders can use unrealised, marked to market profits to place new positions and manage existing ones. Consequently, letting profits run and generating new profit-making opportunities are not mutually exclusive.

** This information does not constitute an offer or solicitation and should not be relied on as such to enter into a transaction or for any investment decision. This information is provided for information purposes only. Any opinions expressed in this document represent the views of NSFX at the time of preparation. They are thus subject to change without notice. NSFX believes that the information contained herein is accurate as at the date of publication. However, no warranty of accuracy is given by NSFX and no liability in respect of any errors or omissions, including any third party liability, are accepted by NSFX or any director, officer or employee.