If you’ve been thinking about investing some time and money into stocks or forex trading, but are having trouble deciding which would be the easiest and most suitable for an entry level trader, there are a few important considerations that should be made before you make any commitments. As a student, your goal should be to focus on learning as much as possible about the fundamentals rather than rushing into advanced endeavours that don’t offer a high chance of initial success. With that said, here are several reasons why student traders should start with forex trading instead of jumping straight into stocks:
Learning Curve and Difficulty
There are literally thousands of stocks available in the New York Stock Exchange (NYSE). In contrast, there are only dozens of currencies listed in the foreign exchange market, and most forex traders only focus on four major currency pairs, which consist of GBP/USD, USD/JPY, USD/CHF, and EUR/USD. Thus, for a newcomer there’s no doubt that forex provides a more novice-friendly platform that doesn’t require nearly as much research as the stock market.
24-Hour Market Availability
Louis Hernandez Jr reminds that the NYSE is typically only active from 9:30 Am to 4 PM Eastern Time, giving new traders limited opportunities to hone their craft. Furthermore, during these hours many part-time traders are busy at their day jobs and therefore can’t fully devote their time to analysing data and making trades. On the other hand, the forex market operates 24 hours a day, so schedules are never an issue and you can focus on becoming a better trader at any time of the day or night.
Fewer and Lower Commissions and Fees
The majority of forex brokers do not charge a commission or any significant transaction fees when you’re trading currencies over the phone or online. Furthermore, the spread is always fully transparent and much tighter and more consistent than those seen in the stock market. Student traders typically don’t have a lot of extra capital to throw around on unnecessary expenses, so the more affordable fee/commission structure in forex is preferable.
No Delay in Market Orders
Most forex brokers guarantee entry, limit, and stop orders as long as market conditions are not in an unusually volatile state (which is an exceptionally rare occurrence). This means you’re able to act upon real-time data rather than relying on predictions and projections as you would when trading stocks. Being able to execute knowing that your trade will be based on current market conditions is a huge relief for student traders when compared to the alternative of waiting for transactions to finalise in the stock market with no guarantee that the market conditions will be the same when the deal is done.
Students Need Simplicity
Forex trading gives students the ability to focus on key concepts without having to spread themselves too thin with market research. Thus, trading currency pairs will always be a better entry level investment method than the more demanding alternative of trading stocks.