After a few years of trading forex without really going anywhere close to the $1million I dreamed of like 7 years ago, I'm beginning to have this question.
I've heard and read about too many guys who made millions trading stocks but I've never really read or heard of anyone making millions by trading forex, is it really so hard? Why there are more millionaires on stocks than on forex?
Stocks have had a huge bull run - when governments provide "quantitative easing" / stimulus packages, the money often goes into shares. Like any Ponzi scheme, it will eventually run out of steam when people begin to realise the premium price they are paying for a piece of paper (essentially).
When you buy stocks, you need to buy them as a business and don't try to "flip" them for quick profits. Dividends should be your goal. The capital gains should be a bonus - it is not guaranteed. Stocks can be more involving as there are many more stocks as compared to currencies.
You can make millions buying up penny stocks, and then if the stocks go from $0.05 to $1.00+ you have made a fortune - but that is akin to the lottery.
Stocks are a Ponzi scheme, and if you get in early you will win.
Aside from that, there are major differences like:
so many people make over $1million in forex... they are quiet.
forex and stocks.. same technical analysis.... coz trading is about psychology
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I'd go along with everything bluepanther said, with particular reference to the size of the Forex market - very difficult to manipulate on a large scale, unlock stocks.
Also, fundamental news normally has a fairly predictable effect on FX. Unlike stocks where positive news is released about a company and the share price takes a nose dive?
Finally, I'd also have to include leverage as a big plus in FX (if used wisely!)
Equities is a totally different asset class than Forex.
There are many differences b/t trading Equities and Trading Forex and major factors include:
1. Leverage on Equities is usually very small especially to retail investors 1:2 or even 1:1. Leverage to Forex is from 1:100
2. Forex Pairs prices are affected by so many factors : political, economical, fundamental, central banks meeting etc, while stocks are mostly affected if company is doing good as well as the economy. If you are an expert in our industry i.e real estate is easier to access if the sector equities wise if it will go up or down. In forex is more complicated.
3. If there are good news in the Equities Markets usually most of the companies goes up and vis versa ( most win) . In Forex if there are good news in one country the FX pair it will go up against the other pair. ( half win)
4. Hours of Trading 24/5 vs 9-5 M- Friday on Equities so is more difficult to monitor
To Sum up. I disagree that people do not make money in Forex. However, i believe that the people that do make money, are a bit more sophisticated , not like the average Joe type for equities.
stocks are a bit easier to trade as they sentiment driven.. its easy to gauge the mood of the stock market..
fx being relative..alot hard..
i agree with Song_song.. Stock Market is like a lake , FX market is like an ocean..
all in all i think elements like discipline to follow trading system, prudent risk management etc are keys to make money in both markets.