Forex vs Stock and Futures Market

These days there is a wide variety of trading instruments from which a trader can choose to trade in, they have the option of choosing to trade in the stock, futures or forex market. It can be a daunting task to figure out which market would be best for a trader. While every markets has its advantages and disadvantage, here are certain factors as to why trading forex would be a better choice compared to trading in any other financial market.

Market Size

The forex market is the largest financial market in the world. It overshadows both the stock and futures market. The New York Stock Exchange is the largest stock market in the world and it trades a volume of about $22.4 billion each day. On the other hand the futures market trades a volume of about $30 billion per day, but when you compare the stock and futures market to the forex market they are easily dwarfed, as the daily traded volume of the forex market is about $4 trillion per day, making it by far the largest and most liquid market in the world.

24 Hour Market

The forex market is a 24 hour market. The market is open 24 hours a day and 5 and a half days a week. At 5:00 pm EST on Sunday the forex market opens in Sydney and if followed by the opening of the markets in Tokyo, London and finally closes at 4:00 PM EST in New York. Before the New York Market has closed the market in Sydney has opened once again, making the forex market a 24-hour seamless market. If a trader is trading in stocks or futures he can only trade during the trading hours of the exchange.

No Commissions

In forex, traders only have to pay the spread between bid and ask price. Apart from the spread, usually no other additional fees are charged by the broker. The cost of trading forex is usually lower than those of the stock and futures market.

Instant Execution

Since the forex market is a decentralized market, the order placed while trading forex do not have to go through a central exchange in order to be executed. While trading stocks or futures whenever a trade is placed it first has to go to the exchange before the order can be filled, which results in the involvement of a middleman. Having a middleman between the trader and the buyer and seller of a security can cost the trader additional fees or untimely execution of trades.

Leverage

Most stock brokers offer no or minimal leverage. Even while trading in futures probably the maximum leverage that a trader can receive is until 1:50. On the other hand most forex brokers provide a trader with a much higher leverage. Most forex brokers provide around 1:200 leverage, while there are other brokers who provide an even higher leverage all the way till 1:500 and sometimes even 1:1000.

Overall it can be observed that the forex market offers far more advantages compared to the stock or futures market. Hence it would be most advisable to trade forex compared to any other financial market.