Lesson #7: Comparison of Forex and Stocks

The Forex market is open 24 hours a day. Customer service will also be on call 24/7. Brokers are also available starting Sunday 2 pm EST until Friday 4 pm EST.

At the Forex, you can customize your trading schedule because you will have the ability to trade during market hours in the U.S., Asia, and Europe.

No Commission Fee Trading

Brokers also normally will not charge a commission fee. There are also no extra charges for transactions online or over the phone. Trading at the Forex will cost lower than in any market. You also enjoy transparent spread that is also tight and consistent. Brokers take profits through bid and ask prices.

Direct Implementation of Market Orders

On normal market conditions, trades will be instantly executed. Every market order you make enjoys price certainty during normal market situations. This means what you select is the price you will get.

Execution of trade can also be made based on real time streamed prices. You will not experience price discrepancies between your order and exiting figures as displayed on your Forex platform.

Forex brokers will only guarantee your stop orders. Limit and stop guarantees are applicable only during normal market situations. Most of time, fill orders will be instantaneous. However during times of extreme volatility, your execution orders could be delayed.

Short-Selling with no Uptick

When you are in the currency market, you will not be restricted to short sell unlike in the equity market. It does not matter of you are long or short, you will always have the opportunity to trade at Forex.

When you trade currencies, you are essentially buying one currency and sell another one. This means the market has no structural bias. You will enjoy equal access to the market whether it is rising or falling.

Additional Reasons to Enjoy Forex

- There is No Middlemen

- You can get lots of benefits as a trade if there is a centralized exchange. The big issue with this is the existence of middlemen in the trade.

- Buyers and sellers of securities will have to pay the price associated with having a third party in between their trades. The cost to traders could be in monetary value or time.

- In spot currency trading, you will be allowed to directly trade with market makers. These are responsible for the pricing of the currency pair. Essentially, you will get quick access to market and can enjoy cheaper trading costs.

The Market is not controlled by Buy/Sell programs

You will usually hear a scenario that fund A was selling X and buying Z. Rumors abound that funds take profit as the fiscal year is about to close or simple because today is a triple witching day.

These scenarios are made to explain why the market is sliding or why stocks are up or why it is positive for the entire session. Susceptibility to large fund buying and selling is a common trait of the stock market.

If you are on the spot market however, the possibility of a large fund to control the currencies is almost non-existent. Because the currency market is highly liquid, large banks, hedge funds, governments, and conversion houses are simple participant in spot currency trading.

The Market is not influenced by analysts and brokerage firms

If you watch market news on TV, you probably heard about a certain analyst of a brokerage firm keeping recommendations to buy when the stock was clearly rapidly declining. This is fairly normal at the stock market. Regulators and authorities can step in but no matter what they do, this type of activity will still continue.

For companies going public and for the brokerage firms, IPOs are certainly big business. The relationships are mutual as analysts work for brokerage houses which in turn need the companies as client. Catch-22 will not go away.

Considered as the prime market, the foreign exchange could generate billions in revenues. This makes Forex a necessity for global banks and market. At the Forex market, analysts are simply analyzing the movement of the market. They do not drive the flow of deals.

Evaluation of 8,000 stocks against 4 major currency pairs

At the New York Stock Exchange, you will encounter approximately 4,500 listed stocks. At NASDAQ, the listed stocks stand at 3,500. You will have a difficult time choosing. You will be confused just getting on top of these companies.

In spot money market trading, you will only trade 12 currencies. But the majority of the transactions are limited to 4 major currency pairs. Surely, trading 4 major currencies will be a lot easier than trading thousands of stocks.