Follow the download button below if you would like to try them out: While the average daily traded value pales in comparison to that of the forex markets, the e-minis provide many of the same perks that are available to forex traders, including reliable liquidity, daily average price movement quotes that are conducive to short-term profits, and trading outside of regular U. I hope you post a video soon. Currencies are traded in pairs. Like forex, then, futures traders have the ability to trade in large position sizes with a small investment, creating the opportunity to enjoy huge gains — or suffer devastating losses.
Forex Versus Indexes
To begin trading stocks you need to have a lot of initial capital to be able to make reasonable returns. This is because the stock market offers very low leverage. The stock market only offers about 1: Forex brokers generally have a larger range of leverage options available. A leverage ratio of 1: There are another stocks listed on the NASDAQ exchange, so you can see how picking a stock to trade can be overwhelming. The stock market is vulnerable to price manipulation.
Large companies can force certain stocks to move by buying or selling them in large amounts, driving the smaller traders out of their positions. Because of the epic scale of the Forex market, no one company or bank can forcefully move the Forex market like they can in the stock exchange. The amount of money required to force a currency to move is just beyond the capabilities of large companies, even single banks cannot force currency prices to move in their favor.
In the debate of Forex vs stocks, the Forex market really shines here. During stock market crashes it is possible for short selling bans to be put in place by the stock exchange. This means you cannot open any new short trades. During market crashes it is very hard to find buyers for your crashing stock. The first thing you want to do is sell off your stocks before they lose too much value. No one wants to buy stocks in the middle of market crashes.
Unless you can find a willing buyer for your stock you may be forced to sit by and watch your money disappear. If you can find a buyer, it is most likely going to be at a very cheap price. In the Forex market, there is no shame in shorting during market crashes. In fact, Forex traders can make fast money when the markets are plummeting in chaos.
The e-minis boast strong liquidity and have become favorites among short-term traders because of favorable average daily price ranges. In addition, the contract size is much more affordable than the full-sized stock index futures contracts. The volatility and liquidity of the e-mini contracts are enjoyed by the many short-term traders who participate in stock market indexes. The average daily range in price movement of the e-mini contracts affords great opportunity for profiting from short-term market moves.
While the average daily traded value pales in comparison to that of the forex markets, the e-minis provide many of the same perks that are available to forex traders, including reliable liquidity, daily average price movement quotes that are conducive to short-term profits, and trading outside of regular U.
Futures traders can use large amounts of leverage similar to that available to forex traders. With futures, the leverage is referred to as margin, a mandatory deposit that can be used by a broker to cover account losses. Brokers may choose to require higher margin amounts. Like forex, then, futures traders have the ability to trade in large position sizes with a small investment, creating the opportunity to enjoy huge gains — or suffer devastating losses. While trading does exist nearly around the clock for the electronically traded e-minis trading ceases for about an hour a day to enable institutional investors to value their positions , the volume may be lower than the forex market, and liquidity during off-market hours could be a concern depending on the particular contract and time of day.
While outside the scope of this article, it should be noted that various trading instruments are treated differently at tax time. Short-term gains on futures contracts, for example, may be eligible for lower tax rates than short-term gains on stocks.
In addition, active traders may be eligible to choose the mark-to-market MTM status for IRS purposes, which allows deductions for trading-related expenses, such as platform fees or education. IRS Publication and Revenue Procedure cover the basic guidelines on how to properly qualify as a trader for tax purposes.
It is strongly recommended that traders and investors seek the advice and expertise of a qualified accountant or other tax specialist to most favorably manage investment activities and related tax liabilities, especially since trading forex can make for a confusing time organizing your taxes. The internet and electronic trading have opened the doors to active traders and investors around the world to participate in a growing variety of markets.
The decision to trade stocks, forex or futures contracts is often based on risk tolerance, account size and convenience. If an active trader is not available during regular market hours to enter, exit or properly manage trades, stocks are not the best option. However, if an investor's market strategy is to buy and hold for the long term, generating steady growth and earning dividends, stocks are a practical choice.
The instrument s a trader or investor selects should be based on which is the best fit of strategies, goals and risk tolerance. Tax Treatment While outside the scope of this article, it should be noted that various trading instruments are treated differently at tax time.