STOCKS VS. FOREX – POINTS TO PONDER


It's only rational to trade an item whose price will change substantially if you're hoping to profit in the near term. After all, you won't make any money if it doesn't move steeply. Trading stocks, on the surface, appears to give more advantages in this aspect. The S&P 500 Stock Index has fluctuated roughly twice as much as the EUR/USD pair over the last 10 years on average. Individual stocks can move even more than the S&P in the same time period (both up and down).

When you look at it more closely, though, it's clear that Forex trading has one huge advantage over stock trading, even if the price changes aren't as large. Leverage is the term for this advantage. The overall maximum possible borrowing ratio that you can utilise on a trade is known as leverage. A trader could trade with 100 times his deposit if he used a leverage of 1:100. In other words, a trader may place a $100 trade with a deposit of $1 and a leverage of 1:100.

The maximum leverage offered to most licenced and regulated best online stock broker is 1:2. The majority of Forex brokers, on the other hand, provide a leverage of 1:200, with some going as high as 1:1000. This means that if you use leverage correctly, you can profit a hundred times more on a currency movement than you can on a stock movement. Of course, when trading with leverage, you can lose money faster, so keep that in mind when devising your trading strategy and deciding how much leverage to use.

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