2.6. Why do you trade Forex, not other products?
Have you ever think why do you trade Forex, not stock, not option or the others? Have you compared them?
If you talk about Forex Trading, most people will compare it with Stock Trading and Option trading. I am not going to talk much about this; I will tell you the main reasons I trade Forex instead of the others.
I do not trade Stocks and Options because:
- I have to do extensive research in order to choose which stock or option I am going to buy. If you do not want the hassle of researching and analyzing, you can trade Indexes, such as S&P 500. Compare to Forex, you only have a bunch of pairs to choose to trade. I do not need extensive research; I just choose currencies pairs among developed countries.
- Good stocks or options are expensive. Compare to Forex, you will have several lot size to choose, nano, micro, mini and standard lot. And you can match your capital with your trading size lots.
- Individual stocks are very dangerous. Individual stock can lose all of its value. Recall AIG, the biggest insurance company in the world. The stock went down from USD 90 into USD 2, luckily AIG was bailed out and not bankrupt. You would be better trade Indexes if you want to trade Stock or Options. You leave stocks trading to more savvy traders, who have the resources, knowledge, and skills to analyze companies’ economic conditions. Compare to Forex, it is next to impossible that a currency of a developed country lost most its value or all of its value, unless there is something radical happens, such as nuclear war, or so.
- If you trade stocks or options, there are certain trading hours, if you live in a different time zone, then probably you have wake up in the night to monitor the markets. Compare to 24 hours a day from Monday to Friday for Forex trading hour; therefore you can monitor the market in your convenient time.
- If you buy put options, it is comparatively the same with you buy or sell a Forex pair with high leverage and you are forced to put stop loss on your trade. Worse of that, you have a time limit on your trade. There is an expiration date on option trade that you have to close your position regardless you win or loss. You of course can close your position before the expiration date regardless win or lose, but the main thing is if you use stop loss and time limit, the trade is already set against you in the beginning. Compare to Forex, you can choose your own leverage, you are free not to use stop loss; and if you trade with positive swaps, time is your friend, not your enemy.
- There is limitation on short selling.
These are some reasons why I trade Forex:
- Currency can not become zero unlike individual stocks,
- You will get nice interest income if you do the correct purchasing and using correct leverage.
- Forex is a very big market and very liquid. It is 3 times of stocks all over the world combined.
- 24h trading time.
- Low startup capital and scalable.
Currency value tends to move within specific range. It is because a country tends to intervene when its currency gets too expensive or too cheap.