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Stocks or Forex: Which Investment Style Is Right For You?

by Erika Torres
1 comment

investment style, stock market tips, investment advice

Stocks have a long term record of positive returns, making them an obvious choice for traditional buy-and-hold, ‘long only’ investors. Investors in the stock market using a system like this best investment platform uk for traders can receive regular income from dividends, not to mention that taxation is favorable for dividends and capital gains. However, when it comes to trading, Forex trading also has a number of advantages on offer, even though the odds are still stacked in favor of the stock market. If you are trying to decide between investing in the stock market or the Forex market, here’s what you’ll need to take into consideration.

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Analysis: Technical or Fundamental?

Many stock traders consider technical analysis to be just one factor in their investments, whereas it is a major factor when it comes to Forex trading. If your trading strategy is based heavily on determining intrinsic value and using relative valuations, you may be best sticking to the stock market. However, if your trading strengths include analysing and charting technical patterns, Forex trading may provide you with more luck. Download meta trader to get started with all the tools for Forex trading here.

Leverage

When it comes to leverage, Forex trading is a whole different world. If you prefer to trade in the stock market, you’ll be used to leverage levels of around 2:1, whereas in the Forex market you can expect levels to be at around 50:1. Excessive leverage has the potential to maximise your returns when your trades are doing well, however it also has just as much potential to completely wipe out your trading capital in a matter of minutes. If you are unsure about how well at handling leverage you are, you may be better sticking with the stock market.

Discipline

Before deciding whether you would like to trade in the stock or Forex market, it’s important to ask yourself whether or not you have the necessary trading discipline – are you disciplined enough to cut your losses, or let your winners run? If a trading position goes horribly wrong, will you take quick action to rectify it as best you can? After a bad trading day, will you be able to walk away instead of frantically spending an hour trying to make back your losses? Because of the increased potential for loss when trading on the Forex market, good trading discipline is absolutely essential. If you don’t think you could be that disciplined, stocks may be the best option for you.

Trading Window

Think about when your primary trading window is – do you tend to trade more often in the morning, during the day, or in the evening? Many traders also have regular jobs, therefore trading during the day is not feasible. Forex trading is attractive to many traders who also work full time, as it is open for virtually twenty four hours a day, five days a week.

If you’re a trader, do you trade on the Forex or the stock market? What prompted you to make the decision between the two? Leave your response in the comments.

1 comment

Jayson @ Monster Piggy Bank September 26, 2015 - 4:43 pm

I’d go for stock for one reason because commissions in the stock market tend to be much, much higher than in the forex market.

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