Why Most Amateur Traders Are Attracted to Stocks

Filed under: Learn Forex Trading |

It is true that the vast majority of first time traders are attracted to the stock market. In fact, many first time traders believe that this is the only market to trade, but they couldn’t be more wrong. There are many financial markets that one can trade, including commodities, futures, options, the forex market, and of course, the various stock markets around the world. Another assumption that amateurs make is that the stock markets are the largest markets in the world for trading on. This assumption couldn’t be more wrong.

 

The vast majority of the world’s trading capital is pumped into the foreign exchange markets. It dwarfs the stock markets by comparison. Every day, around four trillion dollars is traded on the forex markets. That is a LOT of money! So why do most people still insist on buying stocks instead of trading the foreign exchange markets?

 

One of the reasons is that most people simply do not have the time to trade. They buy a stock with a long-term view, and check the price in the newspaper once in a while. If you know the fundamentals of a company and they are strong, then this is not a bad strategy. However, a problem is that the potential of a company is often already accounted for in the price, so if anything negative happens, the price can quickly come crashing down.

 

What is great about the forex market is that it is open 24 hours per day – so even if you don’t have much time to trade, you can still find thirty minutes or so at some point in the day to check your charts. There is also unbelievable liquidity, and unlike the stock market where there are times when you will find it difficult to find a buyer or seller (especially in lower cap stocks), the forex market will always have a buyer or seller available.

 

So if you trade stocks and know little about the forex market – why not take a look? Who knows – it might be the market for you!

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