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Forex vs Stocks: The Ultimate Showdown. Sorry to disappoint, but there’s no showdown…it’s more like a back-alley beat down. I’m a Forex trader, what’d you expect? ?? But really, when it comes to Forex vs stocks there isn’t a ton of competition. I digress, stocks still have their place in the world. Heck, I still invest in stocks every month, but when it comes to trading I choose Forex over the stock market every day of the week. Here are the top 5 reasons why I like Forex over the stock market. #1 Opportunity. Market Hours and Overlap. Being able to trade the Forex market 24 hours a day and 5 days a week can be a great advantage over the stock market, which is only open 8 hours a day and 5 days a week. The real advantage here is not being able to trade around the clock, but rather having 5 days of trading where there are no opening gaps in the morning. This means you can hold a trade overnight in the Forex market without worrying about a huge gap in the morning, which can and does happen in the stock market. While the ‘around the clock’ trading ability of the Forex market can be a major advantage, to the untrained Forex trader it can be an absolute curse. It can easily turn into long nights of staring at your screen watching every tick, biting your nails with anxiety. Trust me, I’ve been there! I developed my forex price action trading course to help traders avoid falling into this all too common trap. #2 Simplicity. Major Pairs Make Trading Simpler. When it comes to Forex vs stocks and simplicity, there’s no comparison. This is because the eight major currency pairs account for the majority of market volume. This is compared to the more than 2,000 listings on the NYSE alone! This allows traders to focus on fewer trading instruments while still providing plenty of trade setups. #3 Liquidity. Money Movement: Forex vs. Stock Market. When comparing Forex vs stocks , the volume traded in the Forex market is substantially higher than that of the stock market. This means that under normal circumstances orders are filled with ease and there isn’t a large bid-ask spread. Now, unless you’re trading Warren Buffet’s bankroll you aren’t going to have an issue getting your order filled in terms of market liquidity. However, this does mean that the bid-ask spread will tend to be lower in the Forex market than the stock market. This is critical especially as your position size increases. Being able to get in and out of the Forex market without worry is a huge advantage over the stock market. Take a look at the image above to get a feel for the massive discrepancy in liquidity between the Forex market and stock market. #4 Market Growth. Heading in Opposite Directions. Yet another disparity between Forex vs stocks where Forex takes the day. The volume in each market is moving to opposite ends of the spectrum. In other words, volume in the Forex market is flourishing while volume in the stock market is slowing. Forex has been growing steadily for the past 15 years, while the stock market has returned to pre-2006 volume. #5 Profit Potential. Forex vs Stocks. Leverage in the Forex market can turn small moves into large profits, and large losses if you aren’t careful. This is why having a coach to teach you how to trade price action is critical to your success as a trader. Take a look at the graph below. This shows two $2,500 investments – one a stock investment in Tesla Motors, Inc. and the other in AUD/USD utilizing 20:1 leverage. In the image above, we can see that Tesla rose by 234%, which is extraordinary, while the AUD/USD currency pair changed just 11%. However, due to leverage in the Forex market the profit was the same between the two instruments. As stated above, the leverage in the Forex market can be a great asset, but only if you know how to use it properly. Far too often I hear about traders abusing leverage which usually leads to losing more money than they bargained for. #6 Long or Short (Buy or Sell) Anyone who knows me will tell you that I like to save the best for last. This is by FAR my favorite aspect of trading Forex vs stocks. The ability to make money regardless of which way a particular Forex currency pair is trending is a great asset to the Forex market. What this means is that while you may need 20 stocks to make up a decent ‘watch list’, you may only need 10 currency pairs. This is because, due to the fact that Forex currency pairs can be traded long or short, they essentially give you twice as many trade setups as a single stock in the stock market. While you can go short in some cases in the stock market, you’ll need to jump through a few hoops with your broker to do so. Going short on a stock is also viewed as unethical by many, since you are essentially hoping that a company under performs. An extreme example of this was the shorting that took place to Lehman Brother’s stock in 2008. When it comes to the Forex market, the debate of whether to go long or short is irrelevant; the only thing that matters is finding the right price action trading strategies to trade. In closing, when it comes to Forex vs stocks I think Forex beats the stock market hands down. I’m obviously a little biased being a Forex trader, but when you compare the advantages over disadvantages I think you’ll find that Forex wins out. Whether you decide to trade Forex or the stock market, I strongly urge you to find an experienced coach who is actually trading using the strategies he/she teaches. To your trading success! Very interesting info!Perfect just what I was looking for! Private Trading Community. About Justin Bennett. Justin Bennett is a Forex trader, coach and founder of Daily Price Action. He began trading equities and ETFs in 2002 and later transitioned to Forex in 2007. His "aha" moment came in 2010 when he discovered the simple yet profitable technical patterns he teaches today. Justin has now taught more than 1,000 students from over 60 countries in the Daily Price Action course and community. He has also appeared in various printed material including an interview in Stocks & Commodities magazine. Disclaimer: Any Advice or information on this website is General Advice Only - It does not take into account your personal circumstances, please do not trade or invest based solely on this information. By Viewing any material or using the information within this site you agree that this is general education material and you will not hold any person or entity responsible for loss or damages resulting from the content or general advice provided here by Daily Price Action, its employees, directors or fellow members. Futures, options, and spot currency trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This website is neither a solicitation nor an offer to Buy/Sell futures, spot forex, cfd's, options or other financial products. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website. The past performance of any trading system or methodology is not necessarily indicative of future results. High Risk Warning: Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, and options and be willing to accept them in order to trade in these markets. Forex trading involves substantial risk of loss and is not suitable for all investors. Please do not trade with borrowed money or money you cannot afford to lose. Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. We will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results. Copyright 2018 by Daily Price Action, LLC. Please log in again. The login page will open in a new window. After logging in you can close it and return to this page. Forex vs Stocks: Which is a Better Investment? 4 Comments. for me Forex is the thing which I don’t understand so easily, we have to talk more about leverage, variety and versatility here.. where as for stocks it is equally confusing but for stocks most of the work is done by analysts and we have to cautious in picking what suits our risk profile.. Forex and stocks have completely different investment scenario. Forex is not for investing, it is constant buy and sell scenario with aim to make interest on buy and sell price difference. Forex not have long investment scenario like shares. For example if you invest in some currency and after you sell her in 30 year you could earn nothing. Stocks are investing vehicle if you invested in any large company 30 years ago like, CocaCola, Microsoft, GE, Sony you received nice portfolio growth over time and dividends. But Forex can give you same earning in just weak, but also brings high risks. This is always a challenge for those of us that don’t have a lot of time to research our investments. That said, you laid it out quite well. The risk is something I have always been concerned with but with any investment, there is risk, right? I have always wondered if it were just smarter to invest money in my own life and business instead of over analyzing the markets. Just a thought. did you know that many investors get into forex trading and FAIL … Protect yourself and your assets. Leave A Comment. Disclaimer: Modest Money is designed to provide entertainment and information to investors and those who would like to learn about the market, personal finance, loans and more. You should never use the information on Modest Money as investment advice. We simply don't have enough information about you, your unique portfolio, nor your goals to provide investment advice. When making investment and other financial decisions, there is one piece of advice we can give you! Do your own research and think about discussing your opinions with a local, registered advisor!