Day Trading the Stock Market vs. Forex Trading

Day trading in the securities market is viewed as an attractive investment vehicle in general. The stock market has been highly volatile since the last decade and this contributed to the growth of speculation in stock trading. However, the stock market is quite erratic in character and securities reflect the irrational nature that is prevalent in the stock market.

The return on investment in day trading in stocks widely varies with market fluctuations. In previous years, capital investment in day trading was common and higher return on investment was available only for non exponential investments.

The market for future stocks was attracting many investors as they could leverage more capital. The spot currency trading or day trading is another way to leverage current capital into trade. Spot currency or forex day trading provide greater options to the traders as the forex market is more buoyant and stronger than the stock market. Traders in day trading have spotted an excellent opportunity in foreign exchange trading.

Third Party Intervention

The day trading market for securities is generally crowded by middlemen or brokers. They are the negotiators, and act as an interface between buyers and sellers. This involvement of middleman takes away a part of the profit earned by buyers or sellers, and in case of loss you have to pay the cost of involving the middleman from your pocket. Trading with the help of a middleman costs both time and money.

Traders conducting day trading get faster access to the forex market at lower costs. Day trading Forex does not involve a third party, apart from the buyer and the seller. It can take place without the middleman and allows you to deal with the market situation directly and handle the market players responsible for the pricing of currency pairs.

4 Major Currency Pairs vs. 8000 Stocks

Almost 8000 stocks are listed on the New York stock exchange and NASDAQ. This is a global figure for the USA. In addition to this, there are domestic stock markets. They have many such more listings in all the countries. It is really impossible to make out which stocks are the best for you. So for day trading in stock markets you need to spend a great deal of time and energy to list them properly. If you are engaged in a full time strenuous job then this becomes more difficult. You engage a broker and pay the fees irrespective of the profit and loss. The situation is made worse by not having enough time to spend in the stock market.

In forex day trading, however, if you have an internet connection and download the trading software then trading in 4 major markets becomes quite convenient. The market is open around the clock for five and a half days a week (closed for weekends). The four or five major currencies are a handful and you can easily locate your trade. You can conveniently trade in your choice of currency pairs in your spare time without disturbing your daily work schedule even while on holiday. Over and above this, there is no brokerage fee to pay.

Commission Free

Day trading in Forex markets requires no commissions, no government fees, no clearing fees, no brokerage fees and no exchange fees.

Control Over the Market

The stock market is highly affected by large fund buying and selling. Events like financial year ending or triple watching day largely affects the stock market. Whereas the spot or forex market is has high liquidity preference and it is less likely that a particular currency in controlled by large fund movements from banks or other financial institutions alone.

The forex market is unpredictable, and has an imperative to act accordingly. Big corporations, financial institutions, banks, FCMs, retail currency conversion houses, hedge funds, governments and individual traders have little influence or control on the market and the liquidity is exceptional. The only regulatory control to some extent can be exercised by the Central Bank of the country in times of inflation or depreciation of a currency due to a spectrum of socio-economic and political factors.

Influence on the Market

The forex market generates billions of money for banks all around the globe. It is absolutely necessary to study this trend and analyze the pattern to help the forex investors have a better grip of the market dealings. Analysts work for brokerage agencies to predict a pattern and trend. Even if they have the capability it is unethical to publicly advise on buying and selling as per government recommendations. Analysts in forex market never determines the flow or the trend they just try to analyze the pattern. So the forex market is least susceptible to analysts and predictors who have least control on the movements of currencies.

No Premium Trade

The currency trading does not involve any premium for calling in orders. You can stop orders, limit orders and contingent orders. You will never be charged for an extra penny for using orders. A currency market offers you to place market orders at a no price qualifier option which you will never find in a stock brokerage agency.

Pyramid Strategy

The profit options are wide and better in a forex market. You can leverage your profit and gain more on that. You can use your profits to earn more and gain more by using the pyramid trading strategy. You can start with a low margin and move on higher margin trading as you gain more and more.

STOCKS vs. FOREX – Final Arguments

The stock market is highly speculative and less flexible. You can do day trading only 7 hours per day or even less depending on market conditions. Liquidity is highly restricted and you cannot trade if your gains are not realized. The stock market is crowded by third party individuals who consume a substantial cost in terms of time or money. You always have to pay high exchange fees to get quotes in a securities market.

The forex market is the world's largest currency transaction market where dealing takes place 24 hours per day, 7 days per week. The liquidity is very high and traders are able to trade without middlemen and pay no commissions. The forex market also offers free real-time quotes for dealings. Further, you can do day trading even with unrealized profits.