Forex Vs. Stocks

In order to maintain a diversified and growing portfolio, stock holdings need to be balanced by foreign exchange positions. Currency rates, economic issues and the health of the company in question compound the impact of stock positions in your portfolio. Forex provides the diversity that is necessary to maintain consistent portfolio growth.

Forex Brings Profit in Bear and Bull Markets

• In the foreign exchange market, there is no short selling restriction. There is potential for profit in currencies regardless of which way the market moves. Forex always involves selling one currency to buy another, so there is no structural bias to the market. Depending on short and long positions, a trader always has an opportunity to profit in a fluctuating market.

Forex Provides up to 50 Times the Leverage of Stocks

• Foreign exchange trading with Forex Capital Management can give you up to 50 times the leverage of your stock trading accounts. For every US$1,000 you invest in stocks, you gain control of at the most US$2,000 worth of shares. But with Forex Capital Management, margin of only US$1,000 gives you control of a currency trade of up to US$100,000 in currencies.

Forex Makes Money on Interest News

• Any significant news regarding interest rates directly impacts the international financial markets. In the past, when a country has raised its interest rate, its currency strengthens relative to other currencies as investors shift assets to gain better returns. The influence of stock markets has changed this equation since increasing interest rates are typically bad news for the stock markets. Investors transfer money out of the stock market when interest rates rise, which can cause the currency of the country to weaken on the broader markets. Determining which effect will dominate can be difficult, but there is typically a consensus in the marketplace as to what a rate change will do. Rate changes are typically anticipated since they usually take place after regularly scheduled meetings of central banks. Indicators that typically have the biggest impact on interest rates are PPI, CPI, and GDP.

Forex Offers Broad Diversity

• The balance of trade between nations is one determinant to the relative value of these currencies. A nation that imports more than it exports has a deficit trade balance, which is considered unfavorable to the value of that currency. Prudent investors know that they should diversify the U.S. Dollar balance in their assets through holding a range of currencies. This is challenging since most U.S. banks do not offer foreign currency accounts. Through foreign exchange trading, you control hundreds of thousands of dollars worth of currencies with up to 50 times more leverage than with your stocks. For every US$1,000 margin deposit, you control up to US$100,000 worth of Euros, or Pounds, or Yen, or the currency you believe will outperform the U.S. Dollar in the future.

Forex – Perfect for Technical Traders

• Currencies rarely spend time in tight trading ranges, and there is a tendency for strong trends to develop. Over 80% of trading volume is speculative in nature, so the market frequently overshoots before correcting itself. A technically trained trader can identify these breakouts, providing a range of opportunities for entering and exiting positions.

Analyze a Nation like a Corporation

• Currencies are always traded in pairs –one currency is purchased with holdings in another. As with stocks, better FX returns are provided by the currency of a country that demonstrates faster growth and is in a better economic condition that others. Currency pricing reflects the amount of available supply and demand. Interest rates and the relative strength of the economy are the two primary factors that determine the availability of a currency. Leading economic indicators reflect the economic health of a nation, and are in large part responsible for shifts. An overwhelming amount of data is available at regular intervals – the challenge is to determine what factors are more influential than others. Interest rates and international trade ratios are typically the most important.

Trade Forex 24-Hours a Day

• Forex trading is a window to the world economy. Trading starts on Sunday at 5:00 PM Eastern Time with the opening of the markets in Singapore and Sidney. A couple of hours later, the Tokyo market is open. Next is London, which opens at 2:00 AM Eastern Time on Monday. And by the time the day catches up to New York, the world currency markets have been at work for fifteen hours. You determine the timing of your trades, instantly reacting to any news or market pressure. Trading stocks when the U.S. markets are closed is not easy and does not provide much liquidity. With forex, you can trade 24-hours a day in the largest and most liquid market in the world.