The age-old question ever since the advent of the Forex market has been whether currency exchanges are more profitable than good, old blue chips. The aspects that should be considered in this financial/philosophical/metaphysical question are too diverse to decide straight away whether one is better than the other. There are a number of constant factors, however, that can help a trader decide which of the two markets is better suited to their needs, expectations and, most importantly, their financial environment.
The world of forex trading
The volatility factor is the most important when consider the benefits of the Forex market. The Forex market itself stands on the founding pillars of volatility and trading session time zones. A wide variety of news factors and the availability of traders and liquidity directly affect currency rates. Currency pairs, their native locations, traded location time zones, and the underlying instruments of trade are among the factors that decide their profitability. For instance, trading the US Dollar against the British Pound is most profitable from either the American or the European market, since that is their native location and London is the central hub of currency exchange.
The time when markets are open also determines the profitability of Forex trade. When a market is open in intraday trading, the availability of liquidity, active traders and open orders is highest, thus ensuring higher volatility. The higher the volatility, the higher the chance of making a successful bid. The instruments available in Forex trade are many, including swaps, spots, futures, options, forwards and Exchange Traded Funds, or ETFs. Of course, the leverage factor plays in favor of Forex trade, since it is much riskier. The 50:1 leverage on Forex allows for greater room for maneuver. In addition, the availability of robots makes Forex a very versatile market despite the difference in time zones and the restrictions set on intraday trade by trading sessions.
Want to trade stocks?
The simple fact of the matter is that Forex trade is for riskier investors and traders who are not into long and holding positions and strategies. Unlike Forex, blue chips or stock trading is focused on indices. The S&P 500, the Dow Jones, NCI (Nasdaq Composite Index) and others affect stock prices and trading decision making. Since blue chips are long-term assets and their volatility is considerably lower than that of Forex traded assets, the leverage that comes with them is much lower at 2:1. The average traded value of blue chip stocks is considerably lower than that of the Forex market, which is easily explained by the fact that they generate lower returns due to lower volatility.
The long term is the way to go if trading stocks and blue chips, since they are not that subjected to intraday volatility and news backgrounds. 2019 promises to be a very interesting year in stock trading given the abundance of geopolitical and geo-economics tribulations. Nonetheless, the relative stability of global corporations makes their stocks the most expensive and the most attractive as blue chips for investment. Among the most lucrative stocks available are the mega-corporations of the American continent, such as Apple, Berkshire Hathaway and Bank of America. Special interest will be paid to companies that are actively incorporating new fintech technologies, such as Visa, Mastercard, and some banks, such as JP Morgan. Johnson & Johnson will be leading in the diversified category, while Russian petro and gas giants, such as Gazprom will offer good returns in light of North Stream’s launch.
The allure of trading on both Forex and on the stock market is high for beginning traders. If one is to start, then the Forex market offers many choices to begin with. However, history, fundamental and technical analysis have demonstrated that lower risk factors are better for beginners. Therefore, the US Dollar and British Pound trading pair offer ample opportunities for gaining the necessary experience. Thanks to its volatility, the pair will give any new trader a taste of Forex and allow the testing of various strategies. The blue chips market also offers new traders good room for maneuver with reasonably priced stocks from Facebook, Nike and Disney.
The choice between Forex and stock trade boils down to individual preferences and risk tolerance, as both markets offer good opportunities for profit making.