If you have been in the Forex market for any length of time, then you have probably heard of Forex Vs Stocks. These are often used interchangeably and tend to be overlooked as a good way to comparison shop for investments. There are several reasons that this is the case, but one of the biggest is simply that most people can not see the clear difference between the two markets. Here are the top differences and how to trade them with confidence.
First, and foremost, the Stocks Market is a FOREX market. This means that you will be trading in US dollars and your investment will be based off of what it cost one dollar to buy one unit a few days ago, today. This means that if you buy something, say a stock, that is very valuable, you can make money. Why? Because the price goes up (since you paid it) when you buy it and down (since you sold it) when you sell it. You simply use what you know about market trends to determine its value.
On the other hand, the Stocks Market is not a FOREX market. The main reason is that Stocks are a volatile market and because of that they tend to be more difficult to read and predict. This is one of the big reasons why Stocks have historically been a poor choice for investing money. They offer no guarantees and, at the same time, offer very little in the way of long term stability. So, as you can see, there is a lot more risk involved.
Now let’s take a look at the top differences between the two markets. When it comes to Forex Trading, you will need to use technical analysis to tell you what the going prices are going to be over a period of time. You do this by tracking currency movements along with looking at different charts and indicators. The stocks markets on the other hand, offer little in the way of technical analysis and instead rely on interpretation and common sense to guide you. Here are some of the top differences you’ll find when comparing the two.
First, when it comes to Stocks, you can make money much faster than you can in Forex Trading. Of course, that means you will need to know how much money you can afford to lose before you risk it. The Stocks markets give you that kind of information at a glance. If you see that a particular stock is beginning to rise, you can buy it with confidence. However, it takes a long time – often years – for the Stock Market to actually catch up to an economic indicator.
Here’s another one. In Forex, you don’t really have any way to “check” the value of an indicator. It’s true that certain indicators do exist which can help you predict where the market is going. But, if you are using one of those programs, you have no way to check its validity or reliability. When it comes down to it, there is no market out there which can be easily checked to determine their validity. This alone, makes the Forex market much more stable.
Another key difference between Stocks and Forex is that you can’t “bet” against the index itself. In Forex, you can bet against specific countries, currencies, etc. However, there is no such thing as betting against the Forex itself. In Stocks, if you want to make money, you can bet against any company in the market.
So which one do you think is the best? That’s entirely up to you. Both offer great benefits to traders who are willing to put in the time and effort. Which one do you think offers the stability and long-term potential that you can gain from trading in both?