I’ve been learning about forex for the last 1-2 years and I’ve done well with demo accounts (though I’ve not yet made a live trade). Strangely however, I’ve never considered whether trading stocks is easier, or in any way similar. Are the skills I will have picked up here, through babypips school, various forums, and websites like FX street/forex factory, likey to be transferable?
To me, it seems like forex is best if you’re a technical analyst whilst stocks would suit you better if you were more keen on fundamentals? Am I correct?
The reason I immediately turned to forex as opposed to stocks, is because I have a small budget, and feared that commissions would be too much of a burden, and because I’d discovered babypips
hello jrc,
glad its all going well for you. ive been interested in financial trading for about the same lenght of time as you, my thoughts on transaction costs are that with stocks you have to pay twice with commison and then spread, which might be bigger as stocks are much less liquid that currency pairs. With forex you usually only have the spread to pay (approx £12 for a standard lot on EURUSD). and as spread cost is proportianal to the size of your trade, it works better for smaller account sizes.
i would speculate that technical analysis would not work particually well with small illiquid stocks as i think TA is a bit of a self fullfilling prophecy so need lots of people doing it in a particlar stock to make it ‘work’. That said, the biggest cap stocks are very activly traded so TA might be more sucessfull here.
but overall, my partaially informed opinion is that there are many transferable skills between the two (although options and futures contacts could be different). just be aware of the simelarities and differences of the two asset classes.
dont know if thats any help to you. but keep at it.
Stocks are less risky than FX and have more potential long-term gain for investors. Technical analysis is equally important. Fundamentals are also important because it confirms the market makers intentions.
Forex is suited to those new to finance. A great way to learn trading. Stocks are far easy to trade but are less accessible because of capital requirements. FX is harder because it is the most manipulated market by specialists and central governments. So as the little guy you have to know the art.
Stock is limited in terms of time and investment here low investors can not alive. Forex facilitate traders to choose investments per their affordability. Stock is difficult to understand for a common man a long learning process is required for this business.
I prefer choose forex. Forex has own advantages which is not owned by another business, such as flexibility of time. We are not bound by time and that is why can trade at any time we want. However, it should be able to manage time well, meaning not to overtrading. And besides, forex trading good prospects for the future, of course, specially those who really pursue forex trading.
That depends on you as the trader. One over the other is not better or worse, some traders specialize in equity trading and do great while others pick forex. In the end it all comes down to what you are able to trade.
I believe with stocks there is only 1 way to make money the stock has to go up. If you buy a stock and it goes down you lose money. With currencies they go up, they go down, they sideways, you have the opportunity to make money no matter what direction they go in. I just started looking into futures and so far to me they seem more like currencies than stocks.
I don’t trade stocks, do you mean all stocks or some stocks? For example I was under the impression if you bought IBM,
@ $100 he if it went down you"re losing til it goes back up over $100. I’m not talking about buying and it goes down so you buy more.
[QUOTE=“gp00053;606933”] I don’t trade stocks, do you mean all stocks or some stocks? For example I was under the impression if you bought IBM, @ $100 he if it went down you"re losing til it goes back up over $100. I’m not talking about buying and it goes down so you buy more.[/QUOTE]
Why I always say keep your mouth shut and eyes and ears open and you would be surprised what you learn. You can short stocks. It’s the process that’s different. The good news is I learned quite a bit about stocks. (I’m still sticking to forex)
Hi GP,
Yes, as others have stated, you can short stocks. The mechanics, however, are completely different. If you believe a stock, XYZ, is about to drop in price and you wish to capitalize on this drop in price, here is what essentially happens:
You wish to sell XYZ at the current price because it is at the top of the market and only has one way to go, down.
You don’t have any shares of XYZ to sell to capitalize on it being at the top of the market thinking to yourself, "Gee, I wish I owned some XYZ."
No problem… you BORROW shares of XYZ from your broker and sell them with the promise/obligation to return those same shares to your broker later.
You then sell the shares you borrowed and you collect the money from the sale WOO HOO!!!
Unfortunately, you must now return the shares you borrowed from your broker.
Since you are a trading genius, XYZ plummets and goes from $100 per share to $50 per share overnight just as you knew it would.
Now you buy back the same number of shares you originally sold at the current price of $50 per share (called “covering”) and return the shares to your broker. You get to pocket the difference, $50 per share (remember, you sold them at $100 and you buy them at only $50). You also owe a hefty interest charge from your broker which prevents you from keeping them indefinitely!).
If the price of the shares went up instead of down then you would have to buy them back at a higher price to return them to your broker (losing money in the trade).
In forex you are not really shorting. You are simply speculating that the price of one currency will lose value compared to another. Forex traders have simply adopted the language of equities traders even though the actual mechanics of a short trade in the two markets are completely different.
If I am not mistaken the terms “short” and “cover” come from the not so glamorous “I am short,” as in “I am a little short of cash, can you loan me a few bucks until payday?” “Cover” comes from the frenetic and even less glamorous, “I need to cover my ass.”
but keep at it.