For traditional buy-and-hold, "long only" investors, stocks remain an obvious choice for a number of reasons. Stocks have a long-term record of positive returns; investors can receive regular income from dividends; dividends and capital gains have favorable taxation, and so on.

But when it comes to trading, even though the odds are still stacked in favor of stocks, forex trading has a number of advantages to offer. Here are 10 factors that you should consider when deciding whether to trade forex or stocks.

You could be well suited for forex trading if you have a yen pun intended for technical analysis, a solid trading discipline, a strong stomach for risk tolerance and for handling a high degree of leverage and if you're market-savvy enough to implement hedging strategies.

If you don't feel these attributes are your strong suits, you should concentrate your investments in the safer world of stock trading. Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund. Latest Videos PeerStreet Offers New Way to Bet on Housing New to Buying Bitcoin?

This Mistake Could Cost You Guides Stock Basics Economics Basics Options Basics Exam Prep Series 7 Exam CFA Level 1 Series 65 Exam. Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. Forex or Stock Trading: Which Is Right For You? By Elvis Picardo, CFA August 18, — 7: Technical or fundamental analysis: Forex trading is heavily geared towards technical analysis , which many stock traders consider to be only one factor in their investments, as they also need to examine market and stock fundamentals.

If determining intrinsic value and using relative valuations are central to your trading strategy, you should probably stick with stocks. But if your strengths include charting and analyzing technical patterns, you could have better luck with forex trading than the average neophyte.

Forex is another world when it comes to leverage. Can you handle leverage of as much as Excessive leverage can magnify returns when your trades are working out but it also could wipe out your trading capital in minutes.

Forex vs. stocks: should you trade Forex or stocks?

If you're unsure about your ability to handle leverage, do yourself a favor and eschew forex trading. Do you have the trading discipline to cut your losses and conversely, let your winners run? For example, do you take prompt action when a trading position is going horribly wrong?

Are you able to walk away after a bad trading day and not try to make back your losses in an hour of frenetic trading? The Importance of Trading Psychology and Discipline. Trading discipline is essential to forex trading because of the potential for magnified losses through leverage. In stock trading, your losses are generally restricted to the amount you invested.

Even if you lose more than your initial investment because you're heavily margined, such losses are unlikely to ever be 50 times your original investment, a fate theoretically possible in margined forex trading. Consider the thousands of retail investors saddled with huge losses on their short Swiss franc positions following that currency's surge on January 15, Forex trading makes it simple to take a bearish bet on a currency.

If you think the Japanese yen is headed lower against the dollar, all you have to do is sell JPY vs.

USD in the forex market. Shorting individual stocks is a bit more complicated, although it's easier to take a short position on equity indices through inverse exchange-traded funds.

Forex trading involves a limited number of currencies. According to the Bank for International Settlements' forex survey , the top four most-traded currencies the U. Add in three other major currencies — the Australian dollar, Swiss franc and Canadian dollar — and a forex trader only has to watch less than 10 major currency pairs.

Seven Emerging Currencies Challenging the Forex Hierarchy. By contrast, a stock trader has a choice of more than 3, stocks using the Russell as the investable universe in the U. Forex trading spreads tend to be tighter than those of stocks because of the forex market's depth. The abundant liquidity and tight spreads makes it easy to get in and out of forex trades quickly. Compare that to stock trades, where liquidity may be a constraint and bid-ask spreads are wider.

Is your primary trading window during the day or evening? For those who have a day job, trading during regular business hours isn't feasible. So if you really have a desire to trade, forex trading is an appealing alternative because it's open virtually 24 hours a day.

Do you tend to concentrate on the big picture and analyze macroeconomic news, or do you prefer digging into individual companies and sectors? Currencies react more directly to macroeconomic news and economic data than individual stocks. Your risk tolerance is a huge consideration when deciding whether to trade forex or stocks. Trading stocks has its share of risks but at least you can mitigate risk in that sector by sticking to the biggest and most liquid blue-chips.

What Is Your Risk Tolerance? Managing downside risk is often more important in forex trading than in stock trading. You will need to understand the various types of orders that can be put through the trading system and also should be able to implement hedging strategies. The Bottom Line You could be well suited for forex trading if you have a yen pun intended for technical analysis, a solid trading discipline, a strong stomach for risk tolerance and for handling a high degree of leverage and if you're market-savvy enough to implement hedging strategies.

Trading foreign currencies can be lucrative, but there are many risks. Investopedia explores the pros and cons of forex trading as a career choice. When approached as a business, forex trading can be profitable and rewarding. Find out what you need to do to avoid big losses as a beginner. With the expected continued world volatility in the near future, there is a lot of money to be made in the forex market. How can you make the most of it?

The forex markets can be both exciting and lucrative. Find out what jobs exist in this space and how to get them.

Stock Market and Forex Relationships: How a Stock Move Translates to Currency Trades

In an increasingly globalized economy, the significance of the foreign exchange marketplace cannot be underestimated. The forex market is where currencies from around the world are traded.

Forex - Foreign Exchange (FX) Market Information at hozenesipew.web.fc2.com

In the past, currency trading was limited to certain Trading in the forex There are many different types of forex accounts available to the retail forex trader. Demo accounts are offered by forex An expense ratio is determined through an annual A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies.

A period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all A legal agreement created by the courts between two parties who did not have a previous obligation to each other.

A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation.

A statistical technique used to measure and quantify the level of financial risk within a firm or investment portfolio over No thanks, I prefer not making money. Content Library Articles Terms Videos Guides Slideshows FAQs Calculators Chart Advisor Stock Analysis Stock Simulator FXtrader Exam Prep Quizzer Net Worth Calculator.

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