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Should You Trade Stocks or Foreign Exchange?

Foreign Exchange or Stocks

The foreign exchange and the stock market are the largest financial markets in the world.  The problem is that many people do not know which market they should be trading on.  It is important that you compare the foreign exchange to the blue chips market.  There are a number of aspects in both markets that you have to consider when you look at the stock and forex markets.

Blue Chips and Foreign Exchange

The foreign exchange market is the largest financial market in the world.  It is also one of the easiest for new traders to get into.  Blue chips are stocks from companies that are well-established and financially sound.  These stocks can provide the owner with dividends in the most challenging of financial conditions.  Blue chips are seen as less volatile than any of the other investments and they provide a steady potential growth of the investor’s portfolio.

If you are looking at short-term trading then the forex market is better than blue chips.  The way that people make their money with blue chips is by holding onto them for a prolonged period of time.  The fact that these stocks are not volatile means that the price does not move enough for short-term trading.

The leverage offered on the forex market varies depending on the broker you are using.  The leverage ranges are from 20:1 to 400:1 depending on where the broker is located.  American brokers are not able to offer more than 20:1 leverage while some other countries allow leverage of 400:1.  Blue chips do not have the same amount of leverage.  Most US brokers only offer leverage of 2:1 because of the US regulations.

The trading hours of the forex market is much longer than blue chips.  Blue chips are restricted to the exchange times of the country the company is located in.  The forex market can be traded on 24 hours Sunday to Friday.

Using the Forex Market or Indexes

Indexes relate to the stock market indexes which are very similar to normal stocks.  Indexes allow traders to gauge of the overall market movement.  There are a range of products available to people through stock market indexes.

If you are looking for short-term trading then e-mini contracts available through stock market indexes.  The forex market is also ideal for short-term trading because of the high volatility of the market and certain currency pairs.  Indexes often move enough in a short amount of time to create profits through the use of short-term trading strategies.

Leverage on the forex market and with stock indexes is very similar.  With the future indexes leverage is referred to as margins which are a deposit that can be used by a broker to cover any losses on an account.  The minimum margin amount is set by the exchange and not the broker.

The e-mini contract which is an electronically traded index does not have the same long hours as the forex market.  While these can be traded outside the exchange times the liquidity is a concern.  There are no concerns with liquidity on the forex market unless there is low liquidity of the currency pair.

 

 

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