Quite often you have to hear disputes, where it is better to trade — Forex or the stock market. Some are confident that the stock market is much better than forex and make it easier for him. Others, on the contrary, are confident that you can earn much more in Forex and faster than in the stock market, because there is a large leverage, and the deposit requirements are minimal. So, let’s look at the advantages and disadvantages of forex and the stock market.
Features of the Forex market
The first thing that comes to mind is the advertising of small starting deposits. Indeed, at Forex you can start trading with only $ 100. And some dealing centers are ready to lower the bar even lower, only in order to attract the attention of customers. The minimum deposit can be only 1 dollar. That’s just not clear what to do with this dollar.
The next moment that can not be overlooked is the leverage (margin trading). Leverage in the forex market can be 1 to 100, 1 to 200 or even 1 to 500 (for small deposits). The more leverage is used, the more and more you can earn. This item is very important for gamers, since they usually do not have a lot of money, but they want to play big. For them it is the norm to double the deposit for three days and then lose everything in one day. After all, the main thing is not earnings, but adrenaline! But in the stock market with its small shoulder 1 to 4 (or even 1 to 2), doubling the deposit for 3 days is unlikely to happen. Although, on the other hand, and to lose everything in one day, too, one must try.
In general, some traders consider leverage as enemy number one. After all, it is because of him that you can lose your entire deposit so quickly. In this case, some (gamblers) deliberately set it equal to 1 to 500. Others, on the contrary, go into their private office and choose the smallest shoulder that is only available to them.
Only one thing I can not understand until now. Why do some traders believe that if you set the leverage to 1 to 30, instead of the standard 1 to 500, then will the trade in the market become safer? There was such a case from my practice. At first I opened a deposit and by default my lending leverage was 1 to 500. Then, after a year of trading in my personal cabinet, I suddenly found out that my shoulder changed by 1 to 200. I did not notice when it happened. The question is: has my trade become more secure? The answer is no, the level of risk remained the same. The level of profit also remained the same. That is, the trading lot and the limit on money management (2% per 1 transaction) have not changed.
We pass to the third feature, which I would like to talk about — trading sessions. Everyone knows that you can trade on the Forex market 24 hours a day, 5 days a week. That is, came from work and trade when you want. But in the stock market it does not work out that way. It is necessary to take into account the time of trading sessions. After all, some traders can not trade on the stock exchange only because the exchange opens when you have to run to work, and when you come home from work, the trading session is over. Solve this problem can be traded on the US stock exchange, but this option is not suitable for everyone.
But Forex can always be traded, although there are some peculiarities here. It should be borne in mind that the market behaves differently, depending on what session is currently held. For example, it is often possible to observe how a flat is formed before the European session. Then, when Europe enters the market, impulse (trend) movements are usually observed. After the end of the European session, the flute comes again and lasts until the American. In America, again, you can observe good trend movements. After the end of the American session, a nightly flute (the Asian session) is formed, which lasts until Europe re-enters the market.
Well, the fourth feature, which is so much spoken at forums — Dealing centers (DC). Also sometimes they are called «kitchens». Since Russia does not have a normal legal framework designed specifically for Forex, most DCs are registered as gaming houses. That is, it turns out that the casino and the Dealing Center are almost the same thing. Therefore, kitchens often trade within themselves, and do not take money out to the real market. And this is really beneficial — not only does the DC take a spread from each transaction (official earnings), so it still does not mind taking money from the deposits of traders. And the second type of earnings is often an order of magnitude greater than the first.