FOREX versus Equities

Historically, the equities markets have been considered, at least by the majority of the public, as a worthwhile investment vehicle. In the past 10 years, securities have taken on a more speculative nature. This was perhaps due to the downfall of the overall stock market, as many security issues experienced extreme volatility because of the "irrational exuberance" displayed in the marketplace. The implied return associated with an investment was no longer true. Many traders engaged in the day trader rush of the late 1990s only to discover that from a leverage standpoint, quite a bit of capital was needed to day trade, and the return -- while potentially higher than long-term investing -- was not exponential, to say the least.

After the onset of the day trader rush, many traders moved in to the futures stock index markets where they found they could better leverage their capital and not have their capital tied up when it could be earning interest or making money somewhere else.
Like the futures markets, spot currency trading is an excellent vehicle for the pattern day trader that desires to leverage her current capital to trade. Spot currency trading provides more options and greater volatility as well as stronger trends than are currently available in stock futures indexes. Former securities day traders have an excellent home in the FOREX market.

There are approximately 4,000 stocks listed on the New York Stock Exchange. Another 2,800 are listed on the NASDAQ. Which one will you trade? Trading just the seven major USD currency pairs instead of 6,800 stocks simplifies matters significantly for the FOREX trader. Fewer decisions, fewer headaches. The trader can specialize in four or five currency pairs and have a full plate offering global opportunities.
By Michael Duane Archer
Michael Duane Archer has been an active futures and FOREX trader for more than 35 years. He has worked in various advisory capacities, notably as a commodity trading advisor, registered SEC investment advisor, and branch manager for Heinold of Hawaii. He currently trades FOREX and futures and is involved in several technical analysis research projects.

Copyrighted 2020. Content published with author's permission.

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