Advantage of Forex over Stock and Commodity Markets

Hi Traders

When one begins to discuss the advantages of investment in the Foreign Currency Exchange Market (Forex) over the Stock or Commodity Market, it is quite easy to sound like a cheerleader and with the same kind of bias. The Forex market offers so many advantages that it is not hard to understand its popularity.
The Forex Market operates 24 hours a day. It is a truly world wide market, and when the sun goes down in one trading center, it is coming up in another. The Forex market, although it has its trends and cycles, is not locked in the Bear vs. the Bull market mentality of the Stock Exchange. Since all Forex trades involve the exchange of one currency for another, one currency’s hard times opens the door for a profit in another currency. The market is not adversely affected by rising interest rates. When a nation raises rates, generally the currency is strengthened, while rising interest rates tends to depress the stock market.
The combined number of different stock issues on the NYSE and NASDAQ exchanges totals 8000. That is a lot of stocks and it is time consuming to keep up with even a portion of them. There are four major currencies, and only about 34 second tier currencies, to consider in the Forex. Brokerage firms do not stand between you and profit in the Forex. Not only are the brokerage and commission fees almost non-existent, but analysts in the Forex tend to actually analyze in the currency market and not dictate or control the rise and fall of the market.
When the two markets are compared, the Forex certainly looks like the better investment choice.


I think your view is a little biased.

I have 90% of my funds in the stock market.

Stocks offer much higher volatility and thus greater profit potential.

I have discussed this in detail in an earlier thread with Rhodytrader, who is now no longer here.

Have a read…

think your view is a little biased.

I have 90% of my funds in the stock market.

Stocks offer much higher volatility and thus greater profit potential.

I have discussed this in detail in an earlier thread with Rhodytrader, who is now no longer here.

Have a read…

301 Moved Permanently

It’s true that stocks have a higher volatility. But can’t that be compesated by the high leverage available for the FOREX merkets?

Just a newbie question?

Both have their advantages and disadvantages.

For example, with forex, your leverage leaves you open to large losses as well as wins.
You can get margin calls with leverage.

The non leveraged stocks are safe as far as that is concerned.

Neither is better than the other.

Whichever you choose depends on what you are looking for.

But to be able to open a $25000 position on stocks if you have 0 leverage you need to have $25000.

In Forex to open a $25000 position with a 1:200 leverage you need $125.

Let’s say you have $25000 on your stocks account and $2000 on your Forex account.

If you suffer a loss of 5% on your position you will lose $1250 on both.

So where is the difference? I know that from money management point of view this is a very bad practice.
But on absolute numbers it sounds the same.

I may be wrong but stocks look much �heavier� than Forex to me without many advantages.
On the other hand futures, options warrants seem to be a risky but at the same time with great profit potential investment products.

Keep in mind that I am a newbie to investment world. I am not saying that you are wrong just showing a point of view.
What do you think?
And wich (and why) is your favorite investement product



All markets have the advantages and disadvantages.

My main concern is that the typical newbie thinks they can come along and somehow beat the market using 200:1 leverage. They soon learn the truth the hard way.

Perhaps that the main reason why so many people come and go.

It would be interesting to see the ratio of loosers in the stock market?


Thank you [B]n_aftab[/B] for your answer to the above post. :slight_smile:

I was going to say something similar but you have said it very well. :slight_smile:

A newbie trader will not last 5 minutes in the market with the above quoted figures.
A margin call is 100% certain.

And an experienced trader would not be so foolish to use that leverage in the first place and using so little money to trade is just plain stupid. :mad:

I thought originally that the 24 hour market was an advantage.

But for me, the London open starts at 4 pm when most day workers are slowing down.
Further, a 24 hour market seems to get you to sit at your computer all day looking for trades, and then waiting even longer for the trades to complete.

By comparison, my stock market opens at 8am, closes 2 pm.
7 am - 1 pm in summer.

This is great.
You are working disciplined hours and then the rest of the day is yours to do other things.

So for me this 24 hour matter is not so great after all. :frowning:

After working with both for some time now, I have come to the conclusion that forex trading has one advantage only …

…that you can trade both long and short in forex,
…whereas in our Australian stock market you can only trade long.

but this advantage is offset by the leverage requirement in forex which makes [U]trading forex a very high risk business.[/U]

Gerald Appel, inventor of the MACD, states in his book [B]Technical Analysis - Power Tools for Active Investors[/B], that the stock market goes up 75% of the time.
As I see it, that is a much better risk.

[B]So in summary, assuming you are an experienced trader, there are horses for courses.[/B]

[B]I trade both.[/B]


I was messing around with paintbrush and made an avitar for myself that looks like the ones the admins use (not trying to pose as an administrator, just think its cool.) Ha, sorry I’m an artist and cant help myself.

Anyway, here is one for you too. Just made it for fun killing time and figured I would send it to you.

THANKS for being one of my favorite folks to post on Babypips!

If you want me to email it to you PM me. If you want it changed somehow, let me know and I would be glad to.

For one reason forex wins over stocks would be -Forex is a zero sum game. A gain is only made when one currency rises in value in relation to another currency. So this means that if one currency is going down, another is going up… something is always guaranteed to go up in the currency market.
It is one of the best playing fields in the investment world.As for me, it blows the stock market out of the water.