hello,
i am a novice in forex but have no clue about stocks.
i have heard that the risks in stock trading( like penny stocks) is lower than in forex,but i have to deposit much more money.
with that in mind, can you use leverage in stocks like in forex, ( like 1:100) , and if yes is your account closed before you lose your entire capital to prevent getting in debt?
Margin isn’t as freely given in stock as it is in Forex. It’s treated much more like credit and you have to be credit worthy to trade on margin.
When available it’s about a 1:2 ratio for leverage.
Whether you go in debt it not largely depends on when your stop order is filled. If you adhere to proper money management it should never be an issue.
I’ve been trading for over 7 years and have never come close to being hit with a margin call.
I’d actually take the credit thing a step further and say it’s exactly like that. When you trade on margin in the stock market you are literally borrowing money from your broker, and therefore have to pay interest. For day trading you might be able to get 4:1, but for anything longer than that it’s 2:1 max.
As for the risks, stock price changes are on average quite a bit bigger than exchange rate moves, even in the most traded and liquid pairs, never mind penny stocks (see Looking at Volatility Across Markets).
It is certainly possible to go into debt in leverage stock trading, especially since they don’t have the kind of automated position closures you see in forex when a margin call hits. That said, since you’re using less leverage (potentially quite a bit) your odds of that happening are low.
If you want to really trade stocks with forex-like leverage you need to look at the futures market.
I have to learn more about stock because i never trade in stock. but it makes me so curious to know more how to trade in stock. nice share guys…
Stocks can go Zero, Forex cant…
There are many similarities between the stock market and the forex market, but there are also some differences. But I’ll suggest you read the book [B]You Can Be a Stock Market Genius[/B] by [B]Joel Greenblatt[/B] This will help you a lot.
In addition to the difference between forex & stock is that the forex market is one that is open generally 24 hours a day. Another difference is that forex market is worldwide, while the stock market is something that takes place only within a country.