Are you better off trading the stockmarket or the forex market? Now, I know this is quite a generic question but itis the one that I come across time and time again.
So, today, I want to look atthis in some more detail so you can get an idea of what the advantages anddisadvantages are of both.
Then you can make a decision which way you want to go.
Here we are, back in sunny England forthose of you that have been wondering where I've been for last week.
Just say, I've been off the airwaves.
I've actually been on my annual vacation to thePhilippine Islands flying around and exploring though I've factored 7, 200islands that make up the Philippine Islands and I was able to explore justfour of them.
So here's to next year, see if we can take in a few more.
Before Icontinue on this very important topic of what's the preferred route to trade, either Forex or the stock market, I want to remind you to subscribe to my channelif you haven't already done so.
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Okay, let's get straight into it.
So what is the bestto trade? Well, let me say, I think this really does come down to your personalobjective, ss much as anything.
Right, so, what is the best approach? Well, generallyspeaking and I mean this in really general terms, stock market investing isfor the longer term.
So, for example if you have a longer termobjective say a 5 to 10 year plan, you might want to look to fund a pension orindeed, pay for school fees.
That generally speaking, trading the stockswill be the preferred approach.
If you can find some stocks with some decentbalance sheets and decent price earnings ratios, and a decent outlook with a goodcustomer base and a sound business model, then that again could be their preferredapproach.
Think about it for a moment.
Most pension funds that make up thepension industry are made up of stocks and bonds, a combination of the two.
Veryrarely, do you see a pension fund made up of foreign exchange exposure, and it is there to hedge, of course.
So stocks are generally, used for morelonger-term investment.
If on the other hand, your objective is a shorter term, perhaps you're looking to supplement your income; possibly giving up your dayjob altogether and become a full-time trader, then in that case maybe Forexmight be the preferred approach.
And that is for a number of reasons.
First of all, I will say this, if you're trading the stock market, there are literally, thousands and thousands of different stocks available to trade globally, ofcourse.
If you look at the S&P, for example, that's made up of 500 US topstocks.
The Russell index made up of 3, 000 stocks, and of course that's justin the United States alone.
The same in the UK and around Europe.
The stockmarket is made up of multiple, multiple stocks getting, a grasp, a handle on anyone individual stock could be quite difficult.
You've got to do a lot ofresearch; however, if you're inclined to be able to do this research, if you'vegot the know-how, and you've got the experience that you can analyze companydata, you can analyze balance sheets, then of course, stocks can be very very profitable.
But there's a whole bunch of stocks out there, that you need to do this workon, and this analysis on.
If on the other hand, you look at the forex market.
Nowthe forex market it's generally made up of say 10 different currency pairs soyou can actually spend a lot less time analyzing an individual currency pairthan the vast array of stocks available out there.
But again, it does depend onpersonal objective, and of course the amount of time that you can allocate tothis.
Also, if you are inclined to be a fundamental trader, a fundamental traderbasically looks at the reasons why a stock or indeed a currency pair willmove if you are fundamental trader that of course trading stocks may bepreferred way to go because the fundamentals are a lot easier topotentially understand then possibly the forex market.
Certainly, if you understandhow to read a company balance sheet and so forth.
If on the other hand you wantto be a technical trader, then I would suggest that the forex market might beeasier.
The forex market is huge.
It has a massive participation of about fivetrillion dollars a day, made up of retail and of course, institutional players.
Now, the other thing that you need to consider is theease of access.
It's far easier when starting off to access the forex marketthan it is the stock market.
And often people that are coming in to trading forthe first time, only have a limited or only want to risk a limited amount ofmoney when getting going- to see if trading is for them or not.
Now, when you start trading the forex market, you can start with just a fewhundred dollars but difficult to do that in the stock market.
Many brokers won'tallow you even to open an account to trade stocks unless you have a fewthousand dollars to get going.
Significantly higher than opening up aForex account.
Now, the other thing that you have to consider is leverage.
Ifyou're starting off with just a thousand dollars, then of course the forex marketoffers leverage.
Sometimes, insane amounts of leverage! Now, I don't encourage anyoneto trade with insane amounts of leverage.
In the old days, they used to be able tooffer 200, 500 to one.
I think that's absolutely ludicrous.
Well, the video talks about this.
You should be trading leverage of really nothing morethan really 20 to 1 .
The recent ESMA regulations in Europe in fact, pull downthe leverage, that's permitted.
But when you trade in the forex market you haveaccess to huge leverage, so you can start off with just a thousand dollars.
If youwere trading trading 20:1 leverage, you're basically exposing yourself totwenty thousand dollars in the market.
That's not as as easy to do when you'retrading the stock market.
So, you need a higher amount of money to start withwhen you're trading the stocks and certainly if you're learning then youmay not want to risk a higher amount when getting going to site; to decidingwhether or not trading is for you or not.
So leverage is available in the forexmarket.
Much more so than in the stock market and certainly you can startexperimenting with small amounts of money, to see if you are indeed, have whatit takes to be a trader.
The cost of trading, generally speaking, is cheaperin the forex market.
Might just pay a commission, small commission, and indeed, the spread .
In some cases you won't pay any commission at all, .
You'll just pay thespread and it stocks, it's almost certain you're gonna spend money on the spreadas well as a decent sized commission.
Certainly more than the forex market inmost cases.
And if you're starting off in trading, You know.
You're deciding if thisis gonna be right for you, you're finding your feet.
The last thing you want to bedoing is competing against the broker with the fees and the spreads and thecommissions, as well.
Now, the forex market is open 24 hours aday.
So no matter what timezone you're in, there's always going to be a market open.
Of course, not on weekends.
Now, certain times of the day will be more liquid, ofcourse, but of course, you can trade different currencies in different timezones to fit in with where the liquidity is.
You also fit in to your lifestyle ifyou've got a day job whatever you may be a shift worker or maybe only have a fewhours a day in the evening now if you're trading the stocks for example stockmarkets are generally open from 8 to 4 on to the stock markets closed you can'ttrade so if you want to trade the US stock market generally speaking you'vegot to be there when the US stock market is open specific times now the nextthing you need to consider is the liquidity now the major Forex pairsgenerally have super large liquidity certainly the Euro against the US dollarwhich is the most actively traded currency pair out there this means thatyou can always get out of a position whether it's for a profit or a losswithout too much slippage which is basically the difference in the pricethat you see on the screen to the price that you get fill that now sometimes inthe stocks certainly in the lower cap stocks this know that this liquidity isnot always there which means the slippage could be higher sometimesyou're in a position you want to get out and you can't get out because of thequiddity has dried up so what you see on the screen isn't necessarily what youget but on smaller accounts this liquidity can really affect you you lastthing you want to be doing is losing money on the slippage now of course thehigher cap stocks they have normally higher liquidity but the higher capstocks generally means that the price of the stock is going to be higher theprice of stock is higher chances are when you're starting off in trading asmaller account you're not going to be able to get much exposure because of theprice of the stock is higher so the quiddity is a main factorsuper high liquidity in the forex market sometimes not as high liquidity in thestock market if there is high liquidity generally the cost of the stock ishigher meaning your exposure to that stock is going to be limited now if youare inclined to be technical trader now technical traderlooks at previous price action and looks for patterns to repeat themselves theylook at charts to see what prices being in the past to see where prices may goin the future now in my opinion and this really is just my opinion that thetechnical traders are more angled to the forex market than they are the stockmarket why because the forex market is the largest market on the planetactually equates to 5 trillion dollars a day so the key levels of support andresistance I think are more respected in the forex market because there's manymany more players than there are in the stock market which has made me generallydriven by fundamentals more so than the technicals as I said this really is apersonal choice based on objectives and based on your character are you morelikely to be a fundamental trader where you're looking to analyze companybalance sheets and looking for price earnings ratios and looking at marketsin general or are you more likely to be a technical trader in which case I thinkthat the forex market might be a preferred way to go certainly if you'restarting off the ease of access the liquidity sways the Fox market all daylong for me for those that don't know me I started my trading career over 30years ago in the city of London standing there in the trading pits lookat that guy there with all that hair isn't that amazing for me the migrationfrom the pits to the screens was quite easy because of the fights market Ididn't have all the knowledge about company balance sheets and didn't havethat experience for me I purely looked at price for me trading the forex marketis much more akin to trading that I grew up with in the trading pits that's whyI've chosen the forex market that's why it gives me the best opportunity becauseit's something that I've grown up with whatever choice you decide I hope youare successful as always if you liked my video give me a thumbs up if you didn'tgive me a thumbs down don't forget to leave a comment and as I said at thebeginning make sure you subscribe to the channel so you can access all myprevious videos don't forget to hit that notification icon see you notified themoment my next video is released till next video happy trading and good luck.
