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I like forex trading over equities because I find it riskier. Yes I read it right - I like it because it is riskier. It is riskier because return of investment comes faster - and I certainly like fast money! I just like the excitement it gives me. Plus, if I play my chips wisely, my revenue can be satisfying over small period.

So what are the differences between forex and equities?

A major area where forex and equities markets differ is in the number of traded instruments. The forex market has very few traded instruments in contrast to the thousands that are found in equities market. Most forex traders devote their attention on seven different currency pairs: the four majors, which include (EUR/USD, USD/JPY, GBP/USD, USD/CHF); and the three commodity pairs (USD/CAD, AUD/USD, NZD/USD).

All other pairs in that you will find in the market are merely different combinations of these currencies, also known as cross currencies.

This allows currency traders like me to easily keep track of the market because instead of having to choose the from 10,000 stocks to find the best value, all that forex traders need to do is get updated on the economic and political news of eight countries.

Another draw back in the equity markets is that it often hit a lull, resulting in shrinking volumes and activity. As a result, it may be hard to open and close positions even when you are ready for a trade.

Moreover, when the market is declining, it takes extreme ingenuity to make a profit. It is difficult to short-sell in the U.S. equities market because of strict rules and regulations regarding the process.

Forex on the other hand offers the opportunity to profit in both rising and declining markets because with each trade, you are buying and selling simultaneously, and short-selling is, therefore, inherent in every transaction. In addition, since the forex market is so liquid, traders are not required to wait for an uptick before they are allowed to enter into a short position, unlike if you were into equities market.

Because the forex market is extremely liquid, margins are low and leverage is high. In the equities market, it’s just not possible to find such low margin rates where most margin traders in the equities markets need at least 50% of the value of the investment available as margin. Luckily for currency traders, they need only as little as 1%.

Furthermore, commissions in the equities market are much higher compared to that in the forex market. Traditional brokers usually get commission fees on top of the spread, including the fees that have to be paid to the exchange. Spot forex brokers take only the spread as their fee for the transaction.

With many investors still wary of equities as many businesses fall, I think I would not be changing my position, at least, for the near future.

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