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Module 1 – Lesson 12 – Stocks vs Forex

1. what are we trading in the market?
The foreign exchange market is the world's largest financial market, accounting for more than $4 trillion in
average traded value each day as of 2011. Many traders are attracted to the Forex market because of its high
liquidity, around-the-clock trading and the amount of leverage that is afforded to participants.

Blue chips, on the other hand, are stocks from well-established and financially sound companies. These stocks
are generally able to operate profitably during challenging economic conditions and have a history of paying
dividends. Blue chips are generally considered to be less volatile than many other investments and are often
used to provide steady growth potential to investors' portfolios.

2. market scale
The Forex market has daily volume of over $3 trillion per day, dwarfing volume in the equity and future
markets combined. Such a huge amount of daily volume allows for excellent price stability in most market
conditions. This means you likely will never have to worry about slippage as you would when trading stocks
or commodities. The price you see quoted on your trading screen is the price you get.

3. high liquidity
When comparing Forex vs. stocks, the volume traded in the Forex market is substantially higher than that of
the stock market. This means that under normal circumstances orders are filled with ease and there isn’t a
large bid-ask spread. Now, unless you’re trading Warren Buffet’s bankroll you aren’t going to have an issue
getting your order filled in terms of market liquidity. However, this does mean that the bid-ask spread will
tend to be lower in the Forex market than the stock market. This is critical especially as your position size
increases
Being able to get in and out of the Forex market without worry is a huge advantage over the stock market.
Look at the image above to get a feel for the massive discrepancy in liquidity between the Forex market and
stock market.

4. full market transparency
Market transparency is much greater in Forex than in stocks or commodities, this means it is easier to analyse
the inner workings of the market and figure out what is driving it. For example, economic reports and news
announcements that drive a country’s economic policy are widely available and accessible for anyone
interested. Whereas an individual company’s accounting statements are much harder if not impossible to
obtain. Instantaneous order execution is another great advantage Forex has over other markets. Retail Forex
trading is generally done over the internet on all electronic platforms.

The Forex market has no central exchange, no open-outcry pits, no floor brokers, and was designed to be this
way to facilitate large banks and allow for instant execution of transactions, this means no delays for you and
extreme ease of execution

5. trading hours
Another consideration in choosing a trading instrument is the time period that each is traded. Trading
sessions for stocks are limited to exchange hours, generally 9:30am to 4pm Eastern Standard Time, Monday
through Friday except for market holidays. The Forex market, on the other hand, remains active round-the-
clock from 5pm EST Sunday, through 5pm EST Friday, opening in Sydney, and then traveling around the world
to Tokyo, London and New York. The flexibility to trade during U.S. Asian and European markets, with good
liquidity virtually any time of day, is a bonus to traders whose schedules would otherwise limit their trading
activity.

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