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Forex market offers several advantages over
Equity trading, such as:
24 hours open market
The biggest advantage of the Forex market over the Equity trading is that of
a 24 hours open market. Active 5 days a week, Forex market gives its traders
what Equity trading does not. Equity trading is restricted to regular
business hours, making Forex, the only incessantly moving trading platform.
Being a 24 hour trading market, there is always some investors, somewhere in
the world who are dynamically trading foreign currencies. This also enables
these investors to react to any breaking news of the market, immediately.
Higher trading volume
Also, the trading volume in the Equity trading or the major stock exchanges
is often 100 times lesser than foreign exchange market. Furthermore,
majority traders are willing to buy and sell currencies because of the need
of various countries, which want to continue to trade goods with each other.
No commission and transaction fees
Forex serves as a more cost-efficient trade as compared to Equity trading,
especially in terms of both commissions and transaction fees. Most of the
sites dealing with Forex trading do not charge its investors or traders with
any commissions or fees, while offering them, access to all the significant
market information required for trading purposes. But in case of Equity
trading, commissions range from $5 to $100 or more per trade in case of full
service brokers.
Price stability through superior liquidity
The trading volume of the Forex market being 100 times more than the New
York Stock Exchange, there are always dealers willing to buy or sell
currencies here. The superior liquidity of the major currencies also helps
ensure price stability in the Forex market. But this cannot be the case with
the Equity trading which has a lower trade volume. This can therefore put
the investors of the stock market to liquidity risk, resulting in larger
price movements.
Higher leverage
Forex market offers higher leverage as compared to all the major stock
exchange trade markets. While the commonly available leverage from the
online Forex dealers is 100:1, the leverage offered by the Equity brokers is
as low as 2:1 margin. Such high leverage enables the Forex traders to trade
much larger sum of currency than they have deposited. Also that depends on
the types of Forex brokers one considers for trading.
Profit Potential
Forex market enables its investors to trade on the upward as well as the
downward trends of the market, giving them the facility to buy and sell
currencies. This serves as another major advantage of Forex market over
Equity trading. This is because in the equity market, it is more difficult
to trade during downward trend of the market, due to some market policies.
There are a certain risk aspects as well.
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