Stock or Currency -- which is better?

alvinhan · Newbie Joined: Dec 15, 2004 Posts: 12

Hi all,

A fundamental question to all of you guys:

What is your reason to trade currency instead of stocks? It is more profitable or what? How do you compare stock and currency trading in terms of risk?
_________________
Regards,
aLvinHan

jane · Guest

Benefits of Forex Trading vs. Equity Trading

* 24 hour trading

* Liquidity

* 20:1 Leverage

* Lower transaction costs

* Equal access to market information

* Profit potential in both rising and falling markets

munwaithong · Guest

any market that makes money is a good market! if u master the right trading and money management techniques you can use consistently it to trade across all markets be it stocks, commodities and forex.

Understanding of the market is essential in trading success. This usually comes only with live trading. Reading from a book doesn't count. You must also be aware that not all markets are equal. and markets may be different in one country compared to another.

The main reasons to I trade currencies instead of stocks:
1> Tremendous leverage (50:1, 100:1 and even 200:1).
2> Volatility.
3> Low spreads (3-5 pips) - transaction costs affect performance in the long run.
4> 24 hour market.

Trading currencies is more profitable than stocks because of leverage. However, it is also not profitable because of leverage. If you use the same leverage to trade stocks, it will be as risky as trading currencies.

At the core of the market is the interbank market. It is the most liquid but beyond the reach of most of us. If you can open a trading account with one of the bulge bracket investment banks you would be a multimillionaire. Rather, we settle for regulated forex market makers who is the counterparty to all our transactions (they do hedge their risks to comply with capital requirements and to avoid being on the worng side of the market). So Jane, unless you are in the Interbank market, the market is only as liquid as your market maker. So, the first step to successful currency trading is to choose the right market maker. I'd avoid a poorly capitalised one. The longer it has been in business the better.

thehand · Guest

people have mentioned ...

transaction costs
leverage
liquidity

I would add that FX markets provide greater transparency and lower information gathering costs than equities.

doc235 · Newbie Joined: Aug 14, 2005 Posts: 30

ok, i read here that an important thing is making sure you have a good liquid market maker, how do you know? where would be the best place to look to seeif themm your trading against is a good one or one you would want to avoide. i undestand how the market works (been a daytrader since 1998 and just now getting into the currencies), since everyone seems to agree on the importance of this aspect, where would you send someone tjat wants to move into the forex from regular market daytrading (it is risky also and can be a real killer).

like trading futures, there is good money in futures but lets stick with the forex for ow, where would one look for a good source of information on this?
and googleing it is a waste of time with the thousands and thousands of finds :/
thank you in advance

KandelC · Newbie Joined: Aug 14, 2005 Posts: 30

doc235 · Newbie Joined: Aug 14, 2005 Posts: 30

Kaabi · Newbie Joined: Aug 28, 2005 Posts: 96

All these terms are so new to me, its hard to learn this so fast. Well, at least I see the pros/cons of trading currency instead of stock.

Kaabi · Newbie Joined: Aug 28, 2005 Posts: 96

Of course, you can monitor currency more closely than stock and analyze it better to decide if the currency you are observing will go up or down in WV.

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