Earning unlimited income in the financial industry

In the financial industry, a lot of investors who want to make money online are wondering if whether they can earn more in stock market trading or by betting in foreign exchange trading. The truth is it is very hard to tell. If you ask a stock market trader he would tell you that it is stocks since you only have to know about the stock’s fundamentals. On the other hand, an FX trader would say that currency investing is the way to go because it is very liquid, lots of money exchanging hands. Surely, the Foreign exchange market is now a $4 trillion-dollar industry everyday, dwarfing the volume of stocks traded in the world stock exchanges which is around $320 billion.

Stock Market trading is usually from  9am to 5pm weekdays. The Forex Market is open 24 hours a day from Monday until Friday.  When it comes to statistics, I have heard a lot of people say that 75% of stock traders usually do not succeed in stock trading while 90% of currency traders also fail.

Regarding costs, when you buy or sell a stock, you usually pay a commission to your broker. In currency trading, a trader pays in the form of spread between the bid-ask, so there is no longer commission paid.

With this knowledge, should one go for stock market investing than forex investing? The answer is it depends on one’s own personality. If you would like to read a lot of company reports, study the market of each company, the balance sheet, then it’s better for you to be a stock market investor. But if you would like to read and analyze economic data, especially those which are released everyday, and track geopolitical events then I suggest you try forex investing.

This leads me to think that if you are a business person by training, then go for stocks, but if you are an economist, then go for currency since you already know the concepts of Economics.  But actually, you can also play the other markets as long as you have the persistence to learn something new.

The importance of volume

Volume or the number of shares/contracts in a given time can offer a significant contribution whether a stock/contract is purchased or sold heavily by investors. Just like in any investigation, you need clues that can lead you to the right decision. Knowing the amount of volume can give you an idea whether the stock/contract would likely make a move upward or downward in the near term. This is very important because it shows you the commitment of investors to a particular stock. In the Forex Market, unfortunately you cannot see the minute, hourly, or even daily volume buying and selling of the different major currencies.  This is a handicap since you cannot see which currency the other traders are focusing on.

Dangers of Investing

What makes forex so dangerous for the rookie investor is the use of leverage. Traders who have no experience in forex would use a high leverage usually in the vicinity of 1:50 to 1:100.  This is the main reason there is a high failure rate for forex traders. They can earn big in a single trade, but at the same time the risk is too high such that they may end up penniless if they took the wrong side of the trade. This is a stark contrast for the experienced forex traders who typically only use 1:5 leverage or not more than 1:10. Caution and risk management are important factors when one is using leverage.

Another warning sign is manipulation. Stocks especially those traded at a low price are known to be prone to manipulation. The major currencies in the world are hard to manipulate owing to the liquidity of the world currencies..

Available literature of Successful Investors

If you want to success in either field, then it is better to learn from the very best. In stocks, there are a lot of success stories of stock traders. An example would be titles about the works of Benjamin Graham and his disciple Warren Buffet. A classic book authored by Ben Graham is the “Intelligent Investor." You can also read about Phil Fisher’s “Common Stocks Uncommon Profits.” I would also suggest the books of William O’ Neil since he has a fundamental and technical perspective of stocks. Currency, sadly there are only a few available literature of the successful currency traders because currency trading is just over 3 decades in existence. My favorite hero here is George Soros and how he profited form the British pound’s fall as well as from the German mark’s appreciation. Soros has authored a lot of books but they deal more with his philosophy and philanthropy and not explanation of his investment decisions. There are only a few successful men who can give credible tips and guidelines to follow in the forex market since it is still a relatively young industry as compared to the stock market industry which has been in existence since the 1600s.