WHY TRADE FOREX INSTEAD OF STOCKS?
In terms of daily transaction volume, the forex market is the world’s largest market and it’s almost the most liquid. Not to be mentioned, this market is highly accessible given that it’s open 24 hours a day, and investors interested in trading forex can make use of far more leverage than they could by trading stocks.
There are several reasons why investors should choose foreign exchange (forex) trading over trading stocks.
The World’s Largest Market
According to the Bank for International Settlements (BIS), In 2019, the global foreign exchange (forex) market saw an average daily turnover of approximately 5.1 trillion U.S. dollars. This means that on an average day in 2019, the sum of all transactions in the forex market amounted to almost 6.6 trillion U.S. dollars.
In comparison, The New York Stock Exchange’s daily trading volume averaged US$38.5 billion during the first five sessions of May 2017. While The Nasdaq’s daily trading volume averaged close to US$85 billion during the first four sessions of that same month. Having a larger market means that it makes it more difficult for individual traders and institutions to engage in price manipulation, which can cause securities to experience sharp price fluctuations in short time periods.
The forex market’s significant size offers traders significant liquidity, which is the ease with which traders can exchange one asset for another. Besides giving traders greater maneuverability, high liquidity can help provide them with lower transaction costs as well as protect traders from price manipulation.
When a market enjoys substantial liquidity, it can more easily handle large increases in trading volume without experiencing significant changes in price, making the market less vulnerable to sharp changes in trading volume aimed at causing price volatility.
24-Hour an Online Availability
One major benefit of trading forex is that the currency markets are open 24 hours a day. Fortunately, there are intermediaries including banks, broker-dealers and other financial institutions located in many different cities to help service the demand. For individual traders, 24-hour access simply means greater options.
Furthermore, all forex trading activities can be done online. Traders or IBs (Introducing broker) don’t need to be in person at the physical forex exchange for placing their orders. As the coronavirus fear spreading out the world, ‘online’ needless to say is the greatest choice.
Traders might trade forex instead of stocks because they can obtain far greater leverage. By borrowing money to make trades, investors can potentially enjoy stronger returns. For example, if a trader has access to 400:1 margin, they can make a £4,000,000 trade with just £10,000 in the margin. As a result, they would only need to put 0.25% of the trade down as margin. While taking this approach can provide traders with stronger returns, they must keep in mind that leverage is a double-edged sword and can also greatly amplify losses.
As a result, traders will benefit from consulting a financial adviser or other qualified financial professionals before using leverage.
As outlined, there are several reasons why investors should opt for forex trading over stock trading. By trading forex, investors can access a market that is far larger in scope than that of the stock market. Because of its size, the stock market offers greater liquidity, which means that investors may be able to enjoy lower transaction costs and more easily enter and exit trades.
The forex market also offers traders greater flexibility than the stock market. Given that it’s open 24 hours a day, investors can more easily combine forex trading with other responsibilities. Finally, the forex market offers greater leverage than the stock market, a factor that can potentially amplify gains as well as losses.
THAT’S WHY FOREX, AS WELL AS IB, IS RITVA’S CHOICE FOR THE STRATEGY OF THIS PERIOD OF TIME