Wednesday, 12 April 2017
Forex or Stocks?
A question that most people willing to invest have come across sometime. The answer really depends on a large amount of factors, but here at FortFS we have made up a list of five basic questions that you ask yourself to understand what investment best serves your needs.
Are you an active or passive trader?
An active trader will be ready to trade and/or monitor its portfolio development on daily or weekly basis, while a passive trader will rather check on his money less often, sometimes leaving all the heavy-lifting to a portfolio manager or using copy-trading services.
As forex is more volatile than equity markets, active traders will likely find it more interesting to work on day trading strategies. On the contrary, stocks tend to be more stable than currencies, with less fluctuations and certainly less stress, they are the way to go for those investors that cannot or don't want to spend lots of time behind the screen.
Are you looking for long-term or short-term profitability?
Nowadays, you can find thousands of websites advertising quick and easy profits, but is that all true? Profitable short-term investments are highly risky and that's simply not for everyone. But that's ok, equity markets are a good alternative for those who are working with a long horizon. If you are planning to get returns on a short period of time, then Forex seems like a better alternative, because of its high liquidity and 24/5 availability to trade.
How do you feel about risk tolerance?
Think of it as cheating at your math exam with the teacher only a meter from you. Right, remember that feeling on your stomach? Well… a similar feeling you will face unless you are a nerves-resistant trader. But you don't have to work that with your psychologist, just have to find your right level of risk tolerance. Remember that you should invest only money that you can lose and will not affect your current lifestyle. Basic rule of all. Volatility offered by Forex market is a great thing, but also a dangerous one. Also, keep in mind that forex trading usually involves leveraged positions, which can be even riskier for your capital.
Do you have trading education of any kind?
Don't be fooled by bla-bla brokers, educating yourself it's an essential part of succeeding in financial markets. And that's why FortFS encourages all clients to prepare themselves before moving on with a real account. Basic financial education can be found easily in the web, don't need to spare thousands in formal education. Trading stocks makes it a bit easier, as you can rely on a portfolio manager that will take care of your entire strategy, while you just worry about risk and profits.
What’s your current trading capital?
Another key point that should help you decide whether stocks or forex are best for you. Capital. In other words, how much money are you willing to invest? Capital requirements for forex trading are really low (really, really low), although you should think at least 500 USD to start having some fun. If you are considering stocks, then you would need a bit more cash to make things interesting, especially as no leverage is involved.