My buddies think forex is so crazy risky, that I shouldn’t get involved and I should focus on stocks. That seems to be a common response when I tell them and other people I’m learning forex trading.
Is it just a marketing thing? Not enough people know about forex trading, so they automatically assume is riskier than something they hear about probably all the time from TV, their parents, friends, retirement portfolios, wiz kids making millions on penny stocks, or whatever.
Maybe because of all the apps out there now you can use?
I’d say Forex is more risky - but that is not to say stocks are not risky.
Here is what I think
For whatever reason there is a bias towards day trading in forex - more so than with stocks - and day trading is risky in that its what takes most discipline
Yes there are stock day traders and they too lose money but it takes alot more money to day trade stocks - the barriers to entry for forex are low in comparison
Stocks are less volatile intraday, and it’s intraday volatility that brings out many of our bad trading habits
Stocks have a bias to the upside and generally I think it’s easy to trade up than down.
Many of your friends who say stocks are less risky are likely buy and holders, meaning their experience is probably only ever seeing the market going up.
You always have the Fed at your back in stocks - it’s rare they take away the punch bowl for long so even after a market fall they are ever ready to help stock investors make money.
In fx this isn’t always true.
From a fundamental perspective stocks are much easier to analyse than a currency - the fact is no one really knows why currencies move as they do. In stocks it’s really just about earnings.
In the stock market it’s easy to get sentiment data, flow data, any breadth data - all important when it comes to trading - in forex it’s much harder and almost impossible to get this for is small traders.
I’ve bigged up stocks alot. I personally prefer stock CFDs to forex. However one of the biggest risks in stock trading is gapping, which can if you are unlucky really catch you out.
Especially if your caught in the wrong side of a M&A announcement or fraud allegations.
With all that said you can learn to eliminate many of the risks in forex if you go about your learning in a structured manner
Whether stock trading or forex trading is better for you largely depends on your goals as a trader, on your trading style, and on your tolerance for risk. Forex trading involves far more leverage and far less regulation than stock trading, which makes it both highly lucrative and highly risky.
The financial market is highly volatile and risky. All you have to do is focus on minimizing your risk and work on your money management techniques. Good luck.
My friends would say the same also, but the also look down upon crypto but also don’t trade equities lol. Maybe they have their money in their savings accounts or under their mattresses hahaha. Anyway, yes I think it comes down to lack of awareness. That and a lot of people just don’t want to spend the time learning about this.
Also add to that the fact that there are so many forex scammers out there, certainly doesn’t help.
They’re trading gossip lol. Finance-wise, I actually have no clue what they’re doing. All I know is they’re not interested and zone out when the subject is brought up. They claim they’re better at spending money than trying to invest it — then I think about all the money I’ve lost from trading
it seems to me that the main point, and the reason why in practice stocks are probably safer, overall, for a beginner is that when you trade stocks, your broker is on your side and wants you to do well, whereas with forex, your “broker” isn’t actually a broker at all but is your counterparty, and wins when you lose
i think many people lose sight of this simple reality and don’t begin to understand how significant and important it actually is
