What are the pros and cons of stocks verses foreign currency?
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This entry was posted on Sunday, November 30th, 2008 at 7:24 am and is filed under Currency Trading. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
November 30th, 2008 at 7:24 am
Major currencies will never collapse in value. You can only lose your shirt on currencies if you're using leverage (so every movement in price is amplified, meaning you gain more or lose more). Currencies don't fluctuate as wildly as stocks either.
Stocks have a lot more to consider because it's based on an individual company and anything can cause a company's value to go up or down. The potential rewards & losses are larger.
If buying anythng at the moment, I suggest buying Australian dollars because it's still pretty cheap to buy, there's very little risk and you'll make an easy profit within a few weeks (if not days). Last monday it hit a 4-year low and has already climbed over 7% in value, but it should still rally a bit more.
November 30th, 2008 at 7:24 am
First I would like to say that Smiling is wrong about how much your losses can be trading currencies. All the markets have been very volatile, meaning if you don’t know what your doing you can lose a lot more than just the price of a shirt. For example trading one tenth of a lot on a cross with the dollar (EURUSD) means for every pip up or down is equal to $1 of profit or loss. Which means if you had shorted the (EURUSD) at it’s high of 1.6036 on 7-15-08 and then bought to cover at it’s low of 1.2337 on 10-27-08 the diff would be 3,709 pips equal to $3,709. And with a full lot that would equal $37,090. Ten full lots $370,900. With just this one currency example I think you can understand how you could lose or gain more than the price of a shirt.
But I think the pros and cons of each warrant learning both. Because with currencies you can daytrade and make or lose quick money. With stocks, mutual funds, etfs, bonds, etc you may in the future have a 401k, IRA, and/or just a trading account that you actively manage and not just passively invest without knowing the current and future trend.
But while you start learning try what you learn by using some demo accounts, first before you invest real money. When you get to the point of trading with a net profit and about 75% of your trades are in the money then trade for real.
Here are some links to help and the first has a contest starting 11-17-08 trading stocks and currencies.
Best wishes,
Burt