When I was first getting serious about becoming a trader I did look at different markets and found that Forex at the time suited me for many reasons which I will go over in this article. When you are first getting into trading you want to take a look back behind the curtain and see what goes on behind the scenes so you can make an educated pick.
What are the differences when it comes to Forex and the Stock Market? The biggest difference between the two markets is that Forex (also known as FX) is related to specific currencies with two currencies put against one another (EURUSD) where the stock market is related to specific companies.
- There are literally thousands and thousands of stocks versus forex where most brokers offer between 40 and 70 pairs
- Stocks take a lot of research to get into where forex people trade 100% technical more often than not
- The forex market is much bigger in the stock market in terms of transactions where 5.3 trillion changes hands wherein the stock market it is somewhere around 50 billion last time I checked
- Trading hours are different where forex can be traded 24/5 the stock is 8 hours a day
- The marketplace differs in forex where it is independent for the traders based on where you live is where the rules are set. Where the stock market has its own set of rules.
- Brokerage is different since you have to use a broker in the stocks the fees are usually quite a bit higher wherein forex you have much more options and the fees/spreads are transparent
- Leverage in the stock market usually is around 5:1 wherein forex it begins normally at 50:1 but can go up to 500:1. So if you deposit 1k into your brokerage it is like trading with 500,000 in forex. But don’t jump to conclusions you should almost never have 500:1 as you will likely lose it much more faster than gaining it.
- Speed: forex is instantaneous when you hit that buy/sell button where stocks are usually quite a bit slower through stock brokers.
These are just some of the differences and I will go into more depth with these in the future with other articles. For now I will answer a few more questions I have been asked directly and go from there.
Should I trade stocks or forex?
So you may be just getting into trading and probably have a 401k or other savings plan which is great. But now you think it is time to take control of your investments and starting making your own retirement on the side and looking to go full time in the future which is great.
But do tread carefully and make sure whatever path you choose you demo first to get consistent either market you can lose money very quickly and be left with nothing.
It is true at the time of this writing banks interest rates are low leaving any savings you have just sitting idle not accruing any interest. Remember the days when you could accrue around 2-3% in your bank saving well those days are unfortunately long gone.
I am now a little bias as I trade Forex exclusively well along with trading Cryptocurrencies if I have time on the weekend. But I will give you the few I had when I first started.
If you work around the clock you are going to want to trade forex as it is open 24/5 and has different trading sessions throughout the day that also overlap.
Any money sitting in your bank account is probably already at play in the forex market as this is one of the biggest ways your bank makes money.
If you want to buy and hold trades for a long period of time then maybe stocks may be your thing. You can buy and hold in forex as well and make a great deal of money sometimes the fees like swaps can add up against you or for you as well depending on the currency and broker.
So I think if I was just beginning and looking at all this info I would look to trade forex because you can get started right away I mean in the next hour if you demo first.
Are stocks easier than forex?
I wouldn’t say one is easier than the other. I would say forex is more fun in terms of liquidity and being able to trade 24/5. You can literally jump on or set alerts and look for a trade anytime especially if you are a scalper.
Is Forex Trading A Good Investment?
It definitely can be if you willing to put the time into learning the craft. It takes time to become a professional trader and get winning 8 or 9 out of 10 trades. But really it comes down to your risk vs reward. If I am risking 10 bucks to make 50 bucks that is 5:1 risk reward. So what happens in you don’t have to win 9 out of 10 trades to be profitable.
I hope you see what I mean there. Now are you going to have 5:1 risk reward probably not but even a 2 or 3:1 is a nice trade. And again you don’t have to win 9 out of 10 trades to be profitable.
Does Etrade do forex?
Yes Etrade does do forex along with stocks at the time of this writing. I personally have never used Etrade but I am sure they reputable and I have heard their fees are decent. You can also check out our list of brokers that we have used that you can demo with. I don’t use any brokers that you can setup a demo account easily with because I know new people want to be up and running as quick as possible if you are anything like me.