There is a lot of talk about investment and the current digital climate has really reduced the barrier that would normally be there preventing beginners from starting their investment journey.
The most common methods of investment in 2019 are either through investing in stocks or investing in forex. Both take different skills and both can produce different results, depending on the dedication the trader has.
Information and data are available for certain investments and trades at certain times and can be accessed on a variety of platforms. Indeed, investment no longer looks like people shouting in a packed room but can be done easily from a smartphone.
So, is now really the best time to begin your investment journey?
Introducing Forex Trading
One of the standard methods of investing has always been to trade in the prices of stocks for companies floated on the stock market – whether this is the FTSE 100 or the Dow Jones Industrial Average.
But, for the past few years, another form of investment has grown popular: investing in the foreign exchange market, or forex.
Forex trading involves taking money in one currency and trading it against another currency, leaving you with a greater sum based on the current value of each currency.
Major shifts in Britain, America, and the EU affect the price of the pound, dollar, and euro and other currencies can be used to make a profit based on where each of these currencies stands compared to one another.
Savvy traders who devote a lot of time to trading are able to make a repeated amount of profit based on this.
Investing in Forex vs Investing in Stocks
So, should people invest in forex instead of in stocks? The Forex market is larger – with around $5 trillion in trading volume per day, compared to the stock market’s $200 billion.
For the casual investor, this means very little. The Forex market is more liquid than the stock market, meaning the higher the liquidity, the more assets are involved.
This leads to tighter spreads (the difference between the buy price and the sell price) and fewer transaction costs.
The Forex market also works on a 24-hour clock, while the stock market works for 8 hours, usually the “working hours” of the country involved.
This can have its benefits, but it also means Forex markets can fluctuate while you aren’t able to monitor them, leaving you in a vulnerable position.
Forex trading also incurs less commission than stock trading. Such transparent costs of making the trades are favorable to many.
What Can Affect Stock Prices?
Stock prices will change depending on a bevy of factors.
A new product may see stock prices rise. A CEO blunder or a public criticism may see prices fall (for example, the announcement of the Nintendo Switch saw Nintendo’s stock prices soar, while Kylie Jenner’s throwaway comment about being bored with Snapchat saw the company’s stock prices drop). Even CEO appointments affect stock prices, and whether the new leader is a man or a woman and how much media attention this gets had an impact.
Uplifting and admirable stories of success can also lead to enviable stock prices. Indeed, industry changes can affect the stock prices of companies too, such as the UK’s “sugar tax” affecting soft drinks companies.
So, for those who are interested in investing in stocks, it’s important to ensure you are up to date with big announcements and have your finger on the pulse of how these announcements may affect the stock prices.
Knowledge is Power in Forex
Both Forex trading and trading on the stock market involves knowledge and information to analyze.
There is a range of ways to stay informed with currency fluctuations and the changes in the market, including online platforms that explain the different aspects of trading and allow those investing to analyze the data themselves in order to make their own decisions.
While some rises and drops in the price of currency may not be apparent to everyone, even just staying in touch with the news from around the world could provide an indication as to which currencies are doing well or not.
For instance, every major Brexit announcement from Theresa May saw a fluctuation in the GBP, sometimes up and sometimes down, while President Trump’s various announcements and even tweets have seen changes in the price of the USD.
Issues in various countries of the Eurozone can affect the price of the currency on the whole.
What Kind of Skills Do Forex and Stocks Require?
Forex cultivates skills in day trading, as positions can change daily based on a multitude of factors, whereas stock trading promotes a longer time to maintain your position.
Both trading styles require discipline, not only in terms of waiting for the right time to make investments but also being able to commit to selling at a time when your strategy may call for it, even if the market looks like it may still be booming.
Patience is also a virtue when it comes to trading, as a lot of the game involves waiting and carefully analyzing. Once you have begun your trading journey, you will be liberated with the independence to make the trades and investments that suit you.
While this can seem daunting, it is also very freeing and is one of the primary reasons people begin trading in the first place.
For those interested in beginning their investment or trading journey, things are a lot easier than they were even a decade ago. There is a range of online platforms, including those exclusive to the smartphone, which mean trading can be done by anyone.
Information is at our fingertips, so we can make informed decisions based on the market and the global economies. Deciding whether to invest in forex or in stocks doesn’t have to be a mutually exclusive decision. In fact, many investors dabble with both.
Experiment with both on a short timescale with a strong stop-loss strategy and decide which one you might want to pursue as a side hustle or even as a full-time career.