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Advantages of Forex vs. Stocks
Commission-Free
Simply put:
no commissions, no clearing fees, no exchange fees, no
government fees, and no brokerage fees. There may be
different names for different fees at different places,
but in Spot currencies at FX Universal, no commissions
means just that- NO COMMISSIONS.
8000 stocks
vs. 4 major currency pairs
There are
approximately 4,500 stocks listed on the New York Stock
exchange. Another 3,500 are listed on the NASDAQ. Which
one will you trade? Got the software? Got the time? In
Spot currency trading, you have 4 major markets, 24 hours
a day 5.5 days a week. Concentrate on the majors; find
your trade. You have approximately 34 second-tier
currencies to look at in your spare time (if you are so
inclined).
DayTrader’s
Dream – A Bull Market Either Way
 Due
to the short-selling restrictions in the stock markets, it
is not uncommon for daytraders to have a difficult time
finding profitable trades in a downward moving market.
Although daytraders have tried to circumvent these
barriers by using derivatives such as ‘bullets’ and the
like, the associated costs are often burdensome. Equity
traders are subsequently left with missed opportunities or
very high transaction costs.
In contrast,
the Forex market has no restrictions on short selling.
Since every transaction in the Forex market involves the
buying of one currency and the simultaneous selling of
another, it is a bull-market either way. For example, if
you wanted to go long the EUR/USD – You would be buying
the base currency, which is the EUR, and paying for it in
terms of the counter currency, by selling the USD.
Conversely, if you wanted to short the pair – You would be
selling the base currency, which is the EUR, and paying
for it in terms of the counter currency, by buying USD. In
both examples, a currency was being bought; there is no
negative connotation associated with short selling in the
Forex market.
Better
Leverage
One of the
main advantages for traders trading Spot currencies with
FX Universal is the leverage capability afforded to them.
With margin policies as lenient as .5%, a trader is able
to leverage up to 200:1. That is, a trader can control a
$100,000 position for only $50. Keep in mind however,
leverage is a double-edged sword and you should try to
avoid overleveraging, as it magnifies both profits and
losses.
No Middlemen
The stock
markets are comprised up of a number of centralized
exchanges. One of the problems with any centralized
exchange is the involvement of middlemen. Any party
located in between the trader and the buyer or seller of
the security or instrument traded presents additional
costs. The cost can be either in time or in fees. Spot
currency trading does away with the middlemen and allows
clients to interact directly with the market maker. Forex
traders get quicker access and cheaper transaction costs.
Buy/Sell
Programs Do Not Control the Market
How many
times have you heard that "fund A" was selling "X" or
buying "Z"? Rumor had it that the funds were taking
profits because of the end of the financial year or
because today is "triple witching day", all as an
explanation of why this stock is up or the market in
general is down or positive on the session. No matter what
your broker says the stock market is very susceptible to
large fund buying and selling, and it is not uncommon for
a fund to run a particular issue for a few days. In Spot
currency trading, the liquidity of the Forex market makes
the likelihood of any one fund or bank to control a
particular currency very slim. Banks, hedge funds, FCM's,
governments, retail currency conversion houses and large
net-worth individuals are just some of the participants in
the Spot currency markets where the liquidity is
unprecedented.
Analysts and
Brokerage Firms Are Less Likely to Influence the Market
Have you
watched TV lately? Heard about a certain Telecomm stock
and an analyst of a prestigious brokerage firm accused of
keeping its recommendations, such as "buy" when the stock
was rapidly declining? It is the nature of these
relationships. No matter what the government does to step
in and discourage this type of activity, we have not heard
the last of it. IPO's are big business for both the
companies going public and the brokerage houses.
Relationships are mutually beneficial and analysts work
for the brokerage houses that need the companies as
clients. That catch-22 will never disappear. Foreign
Exchange, as the prime market, generates billions in
revenue for the world's banks and is a necessity of the
global markets. Analysts in Foreign Exchange don't drive
the deal flow, they just analyze the Forex market.
Trade
Countries Like You Do Companies
Equity
traders rely on key fundamental and technical data when
making assessments of a particular company’s future growth
and performance. Just the same, similar factors are
considered when gauging the overall health of a country’s
economy and currency. Currency valuation is a function of
supply and demand. Namely, factors such as interest rate
movements, economic indicators such as GDP, foreign
investment, and the trade balance all provide an
indication of the general health of an economy and
underlying shifts in the supply and demand for that
currency. As a basic example, consider an interest rate
decision by a country’s central bank. If a rate is hiked,
it is expected that capital flows into that country may
increase, as investors may seek to realize a greater
return on their investment in that country vis-ŕ-vis
others. As more capital flows into the country, the demand
for its currency increases - which generally causes an
appreciation of that currency. |
