Forex trading is less risky than trading commodities, futures, and stocks. This article discusses the advantages of Forex trading over trading in other markets.
The investment markets today are primarily divided among Forex trading, commodities trading, futures trading, and the stock market. As speculative investment involves these four primary markets, it gives the investor a better variety of financial vehicles for their portfolio. However, when you are initially getting started in investing, the biggest decision involves choosing the best investment vehicle for a person’s needs. The only way to make an informed decision is by researching each one thoroughly.
Proper research includes comparing the advantages of the Forex market to the other markets. The following are the 5 advantages of Forex trading:
24-hour-a-day accessibility – the ability to trade 24 hours a day is the key advantage that Forex trading has over the other markets since there are Forex markets operating around the world. As the Asian market closes, the UK Forex market opens. Six hours after the opening of the UK market, the North American market opens. Once the North American closes, the Asian market opens and the cycle begins again so that Forex trading occurs around the clock Monday through Friday.
The Forex market mindset differs from that of the NYSE – Forex investors have a different mindset than stock traders do. Granted, there is considerable price movement in the Forex market. However, you do not find the Bull and Bear mentality that characterizes the commodities, futures, and stock markets.
It’s only money – although that sounds somewhat condescending and cynical, “it’s only money” refers to what characterizes Forex trading. The key benefit here is that when one currency decreases in value, another will typically increase. So the ability to profit from an investment opportunity is always there. Additionally, the Forex market is not negatively impacted by rising interest rates. It follows then that when a government’s central bank raises that country’s prime interest rate, that nation’s currency typically gets stronger. The opposite holds true with the stock market as rising interest rates negatively impact trading.
Too many commodities, futures, and stock options to follow – there are roughly 8,000 financial products offered by the NASDAQ and the NYSE which is just too many to keep track of and remember. Conversely, there are four major currencies that are the basis of FOREX trading which are (in order of trading popularity):
- US Dollar (USD)
- British Pound (GBP)
- Canadian Dollar (CAD)
- Japanese Yen (JPY)
Secondary currencies include the Australian dollar (AUD), the New Zealand dollar (NZD), and the Swiss franc (CHF). There are actually another 31 currencies but the bottom line here is that Forex trading is considerably easier than trading in the commodities, futures, and stock markets.
Commissions are considerably lower – another key advantage to Forex trading is that broker commissions are significantly lower than when you are trading in the other markets. Supposedly, an investor can find that Forex market transactions can be conducted on a commission-free basis. However, that is highly doubtful as the way any investment broker earns their living based on their commissions.
Although the above information is more of a brief crash course on the subject of Forex trading, it is still recommended for helping the novice investor get a better grasp of what they are doing in the Forex market.