Two Big Advantages that Forex Trading Has Over Stock Trading

by Trading 101     Sep 05, 2019

For decades, it was impossible for individual investors to enter the world of Forex trading because the barrier for entry was simply too high. Investors needed a down payment of at least $100,000 to begin trading, which is obviously much more than the average man has on his person to suddenly risk and invest. Now, thanks to the spread of online trading software and the use of leverage on the market, it's easier than ever for the common man to enter the world of Forex trading and start making money.

There's also the question today of which is better: stock trading or Forex trading? While there are benefits and drawbacks to each style of trading, Forex trading offers two major benefits, especially to those just getting started.

Forex trading doesn't require commissions. When you trade on the stock market, you generally have to pay commissions on every trade that you make to your broker. These commissions are typically set up as a flat fee, which means that they incentivize larger traders and can seriously hurt smaller traders. If you have less than $25,000 worth of money in your stock trading account, you will likely be losing money whenever you make a trade.

On the other hand, Forex trading does not typically require users to pay a flat rate commission. Instead, traders pay the difference between the bid price and the ask price, which increases as more currency is purchased. This makes the charge as a percentage instead of a flat fee, and thus charges bigger traders significantly more than smaller traders. This method also removes the incentive to go bigger to save money, which encourages the more conservative trading strategies that are more likely to see a profit. The less money that you currently have to invest, the more that I would recommend starting out in Forex trading and working your way up to stock trading.

Forex trading has a higher liquidity. Liquidity is a word that describes the ease with which you can sell a stock, product, or currency. The Forex trading market has an inherent liquidity built into it because you are buying and trading currencies, which will always retain some sort of value in their native countries. Even when a currency hits its lowest point in value (sometimes referred to as the "support" point), it will inevitably rise again because the market for currencies is massive. Stock trading is riskier because there is no inherent value held in a stock. For example, if a company goes out of business, their stock becomes worthless. This makes the stock market much less liquid than the currency trading market, and the process of Forex trading easier for beginners to get involved in.

Now is an amazing time to get involved with Forex trading. However, before making your first trade, you'll want to build up a great trading strategy to prevent you from losing money. This starts with getting a great Forex trading education. Be sure to check out Trading 101's collection of free eBooks, video tutorials, and webinars available online right now by signing up for an account, and get ready to start living better and making money trading currencies.

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