If you are looking to make money from home, without having to worry about selling people products – consider trading the Foreign Exchange Market (Forex) or Penny Stocks to make money. Both of these wealth generating mechanisms have produced many millionaires – but which one could make YOU a MILLIONAIRE?
The goal of this article is to compare the two mechanisms so that you can decide which one is best for you! Will you choose the road of the Penny Stock Millionaire (See How I learned to Trade Stocks and My Strategy) or Forex Millionaire ? Check out these top rated FX signals with a risk FREE TRIAL to get started!
Forex Trading
The Forex (FX) is a worldwide market that can be traded from any country. Foreign currency is the trading vehicle in Forex. Currency traders can trade many of the popular world currencies such as: U.S. Dollar (USD), Canadian Dollar (CAD), Japanese Yen (JPY), Euro (EUR), British Pound (GBP), Australian Dollar (AUD) and many others.
The Forex market dwarves all other world markets! We are talking huge amounts of dollars traded every day – $2 trillion to be exact. To put this into perspective, the Equity and Futures market only trade about $200 Billion per day. This makes the Forex market by far the largest market in the world. This size leads to the first benefit of trading on the forex market: The Forex market in general has more stable prices, has less price manipulation and forex traders enjoy smoother execution of trade orders.
The second advantage that the Forex has over other equity markets, is that it is open 24 hours a day. The only day that the Forex is not available for trading is Saturday. This gives a Forex trader much more flexibility and control to trade when THEY want to or when the opportunity presents itself. The equity markets are limited to trading hours of Mon-Fri (8:30am – 5:00pm) with almost no liquidity outside of these hours.
Forex Costs are Lower Than Stock Trading
FX trading has no commission or fees – this is a huge advantage over the stock market. The costs are extremely low compared to the stock market. The currency pair that you are trading will have a spread in prices – this is what you pay instead of a commission. However, this advantage has been somewhat diminished recently with the introduction of no fee brokerages (e.g. Robinhood).
FX Leverage Advantage – 200:1
This good be a good thing or a life destroying thing….depends on how you look at it. FX markets can have a leverage of 200 to 1. That is right – you can borrow 200x your actual account size. Scary. Very scary. So this means that you can control $20,000 of currency with just $100 ! Usually a broker in the stock market will only lend you 4x your trading cash in the form of margin.
Minimum Account Funding
A FX account can be funded with only a few hundred dollars. These are called mini accounts. This is a big advantage compared to the stock market where you are often expected to have a balance of thousands of dollars to be able to open an account and start trading.
Short Selling
The stock market brokers limit short selling and it is considered a pretty risky trading strategy. However, in FX there is no difference in the level of risk when you short sell a currency pair. It is not ‘frowned’ on the way it can be by stock market brokers. This allows you to bet against currency with ease. So if you are a pessimistic bear by nature, FX might just be for you.
Main Disadvantage of FX Currency Trading
The stock market trader has more than 40000 different stocks to trade. FX investors really only have 4 currency pairs to focus on (comprising of 7 currencies). This of course severely limits the FX traders possible trades.
Conclusions
I am a stock trader (See How I learned to Trade Stocks and My Strategy) but after writing this article I am starting to wonder why I am not trading currency markets. The currency trading markets seem to offer many more benefits with lower risk than trading penny stocks. I am looking to start trading the FX market and will continue to add my research to this site.
Wesley.
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