Why The Forex Market Is A Smarter Choice Than The Stock Market

The Foreign Exchange Market (Forex), an international market that has been in existence for over 100 years, trades an average of $2 Trillion dollars per day. Until recently, however, it's been a market reserved primarily for institutional investors. Today, as a result of technology and the Internet, even individual investors can take advantage of the Forex.

But how does it match up against the Stock Market for investors?

Here are some of the key differences ...

1. The Forex Market is open for trading 24 hours a day, while stocks are only traded 8 hours a day.

2. While transaction costs for a Forex trade are minimal, Stock Market trades often come with much higher commission fees. Due to the same technology and the Internet, though, stock trades are far more reasonable for the individual investor today than they were just a short five years ago.

3. Individual stocks can sometimes be manipulated by unscrupulous companies. This is far more difficult in the currency markets.

4. Investors have far more choices in the Stock Market. In the Forex Market there are only six major currencies.

5. Currency traders have far more leverage and liquidity than do stock traders. In addition, the currency market is much larger than the Stock Market.

It's easy to see that the Forex Market provides many more advantages for its traders. And just because it's still a relatively young market doesn't mean that it comes without the tools, software and signals that can help give the advantage to the individual investors. In fact, there are not only numerous charting services available on the Internet, there's also a rich history of trading strategies that new traders can test and explore for themselves.

Similar to the Stock Market, a new investor has a number of choices before them. For example, he can hire a broker to handle all his trades. This is generally the most expensive alternative in either market. Or he can spend the money for a home-study course and put in the time to educate himself.

More common, again in both stock trading and currency trading, a new investor will choose a strategy or set of strategies that provide comfortable trading parameters and then put those strategies into action using proprietary trading software. Such software almost always comes with charting capabilities (if it doesn't, you'll want to keep looking until you find one that does) that allows the trader to spot trend direction, price activity, and historical movements by using technical analysis indicators such as Bollinger Bands, Fibonacci Arcs, and Standard Error Bands. All very cool ways of analyzing the market and making more intelligent decisions.

At first glance, the differences between the Forex Market and the Stock Market may appear minor. However, with the leverage, liquidity, tools and techniques that a new trader has at his disposal in the Forex Market, there are distinct advantages. A little preliminary research, a set of strategies that are within the trader's comfort zone, and the right tools can all help reduce a trader's risk.