There are approximately 2,800 stocks listed on the New York
Stock exchange. Another 3,100 are listed on the NASDAQ. Which one will you trade? Got the time to stay
on top of so many companies?
In spot currency trading, there are dozens of currencies traded,
but the majority of market players trade the four major pairs. Aren’t four
pairs much easier to keep an eye on than thousands of stocks?
Look at
Mr. Forex. He’s so confident and sexy. Mr. Stocks has no chance!
That’s just one of the many advantages of the forex market over
the stock markets. Here are a few more:
24-Hour Market
The forex market is a seamless 24-hour
market. Most brokers are open from Sunday at 4:00 pm EST until
Friday at 4:00 pm EST, with customer service usually available 24/7. With the
ability to trade during the U.S., Asian, and European market hours, you can
customize your own trading schedule.
Minimal or No Commissions
Most forex brokers charge no commission or additional
transactions fees to trade currencies online or over the phone. Combined with
the tight, consistent, and fully transparent spread, forex trading costs are
lower than those of any other market. Most brokers are compensated for their
services through the bid/ask spread.
Instant Execution of Market Orders
Your trades are instantly executed under normal market
conditions. Under these conditions, usually the price shown when you execute
your market order is the price you get. You’re able to execute directly off
real-time streaming prices (Oh yeeeaah! Big time!).
Keep in mind that many brokers only guarantee stop, limit, and
entry orders under normal market conditions. Trading during a massive alien
invasion from outer space would not fall under “normal market” conditions.
Fills are instantaneous most of the time, but under extraordinarily volatile
market conditions, like during Martian attacks, order execution may experience
delays.
Short-Selling without an Uptick
Unlike the equity market, there is no restriction on short
selling in the currency market. Trading opportunities exist in the currency
market regardless of whether a trader is long or short, or whichever way the
market is moving. Since currency trading always involves buying one currency
and selling another, there is no structural bias to the market. So you always
have equal access to trade in a rising or falling market.
No Middlemen
Centralized
exchanges provide many advantages to the trader. However, one
of the problems with any centralized exchange is the involvement of middlemen.
Any party located in between the trader and the buyer or seller of the security
or instrument traded will cost them money. The cost can be either in time or in
fees.
Spot currency trading, on the other hand, is decentralized,
which means quotes can vary from different currency dealers. Competition
between them is so fierce that you are almost always assured that you get the
best deals. Forex traders get quicker access and cheaper costs.
Buy/Sell programs do not control the market.
How many times have you heard that “Fund A” was selling “X” or
buying “Z”? The stock market is very susceptible to large fund buying and
selling.
In spot trading, the massive size of the forex market makes the
likelihood of any one fund or bank controlling a particular currency very
small. Banks, hedge funds, governments, retail currency conversion houses, and
large net worth individuals are just some of the participants in the spot
currency markets where the liquidity is unprecedented.
Analysts and brokerage firms are less likely to influence the
market
Have you watched TV lately? Heard about a certain Internet stock
and an analyst of a prestigious brokerage firm accused of keeping its
recommendations, such as “buy,” when the stock was rapidly declining? It is the
nature of these relationships. No matter what the government does to step in
and discourage this type of activity, we have not heard the last of it.
IPOs are big business for both the companies going public and
the brokerage houses. Relationships are mutually beneficial and analysts work
for the brokerage houses that need the companies as clients. That catch-22 will
never disappear.
Foreign exchange, as the prime market, generates billions in
revenue for the world’s banks and is a necessity of the global markets.
Analysts in foreign exchange have very little effect on exchange rates; they
just analyze the forex market.
|
Advantages
|
Forex
|
Stocks
|
|
24-Hour
Trading
|
YES
|
No
|
|
Minimal
or no Commission
|
YES
|
No
|
|
Instant
Execution of Market Orders
|
YES
|
No
|
|
Short-selling
without an Uptick
|
YES
|
No
|
|
No
Middlemen
|
YES
|
No
|
|
No
Market Manipulation
|
YES
|
No
|
In the battle between forex vs. stocks, it looks like the
scorecard between Mr. Forex and Mr. Stocks shows a strong victory by Mr. Forex!
Will it go for 2-0 with Mr. Futures?
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