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Every novice trader, coming to the financial markets, finds himself at a kind of crossroads. He faces an important choice – where exactly is it more profitable to trade? Go straight to the stock market? Or maybe pay attention to the commodity? Do Forex? The choice is really important – after all, not only the financial well-being of the trader, but also the foundation of his further activity in the markets depends on it. And if you are facing this issue…
Forex, stock or commodity exchange?
If you wondered which financial market is better to choose for a trading stratum, then this article was created especially for you. After reading it, you will be able to learn about the pros and cons of both exchanges and the Forex currency market.
The fact is that in the modern world all three concepts are mixed to some extent. Here, for example, earlier only large players could trade on the Forex market – these were transactions for the purchase and sale of currencies between legal organizations and banks. Then there was no talk of private speculation and relatively small amounts. The stock market, in turn, also stood out for huge sums and the ability to trade blue-chip stocks and smaller companies, as well as options and futures. But now the line between different trading platforms has become less tangible – how not to get confused in it and clearly understand the difference?
As for the commodity exchange, they have always had the opportunity to make purchase and sale transactions for qualitatively homogeneous and easily interchangeable goods. Since almost every broker now offers trading in commodities on other exchanges, we will not seriously consider this exchange.
Comparing the main two platforms – the Stock Exchanges and the Forex market – it is best to touch on a few key points that are especially important for market beginners. Be sure to specify the size of the minimum deposits, the simplicity and speed of opening a trading account and its verification, the possibility of depositing and withdrawing funds, how reliable and safe trading is, in principle, what trading strategies and tools are available, are there promotions/programs and other benefits.
Stock market for beginners
As already mentioned, the main trading instrument in the stock markets are shares of companies. And to some extent, this is the advantage of the market – after all, the value of shares depends directly on the company, which allows a little more control over market analysis and asset price forecasts. Companies often publish statistics, they have reporting periods – all this helps the trader to navigate the current state of affairs.
The main points about the work of stock exchanges that beginners need to know
- For residents of the Russian Federation – the Russian Stock Exchange – provides a comparative minimum of financial instruments, which are not enough for the full development of trading skills and more solid profits.
- We must not forget about time zones – stock exchanges work according to their personal schedule, depending on their location. For traders from the CIS, the Russian and European exchanges will be the best options, since the time zones are nearby. But the American trading exchange may also be of some interest – it works from 16:30 to 23:00 Moscow time. The most uncomfortable option is the Japanese and Chinese exchanges, with operating hours from 2:00 to 9:00 and from 4:00 to 10:00 Moscow time, respectively.
- Since the main orientation of securities brokers is large players, their conditions are quite strict, and no bonus programs, free training programs, and so on are provided to beginners and regular customers. Attitude towards customers is exceptionally “cold” and businesslike.
- Most often, the QUIK program is used to work with stocks. It allows you to display quotes, conduct graphical analysis, use indicators, and so on.
In addition, if we turn to the criteria listed in the previous section, then from the very first you come across a serious minus. The fact is that to open an account for trading on the stock exchange, you need a slightly larger amount of funds than, for example, on Forex. Most often, this amount starts from $ 500 and above. For a beginner who is just starting to get acquainted with the markets, such an amount may be unbearable and he cannot afford to risk tens of thousands.
The same applies to opening an account. The process of creating an account on the stock exchanges takes quite a long time, and it may also require a physical visit to the office and a lot of paperwork. Some traders compare this procedure with opening a bank deposit – many aspects are similar.
In the case of issues of depositing and withdrawing funds, stock brokers in most cases have only one option – a bank transfer. In today’s realities, this issue is quite acute – at least you need to be sure that such a transfer is possible and the selected bank does not fall under any sanctions.
The activities of stock market brokers are carefully controlled by the states – this means that no broker will risk their reputation and licenses. This guarantees a high level of reliability. Yes, and your funds do not go to the broker – he only acts as an intermediary, and all clients’ money is stored in special depositories that contain a register of all your trading operations and cash flows associated with them.
As for the ways of trading, there is a choice here: income can be active (make several transactions per month and make a profit) or buy bonds or dividend stocks and receive a constant profit in the form of deductions. In fact, by buying such assets that are part of a currently operating business, you can be considered to some extent as a co-owner of it.
And on the issue of additional shares and bonuses, as mentioned above, they are mostly absent in the stock markets.
Is Forex suitable for a beginner?
Forex trading has gained a lot of popularity in recent years, not least due to the years of the pandemic and financial crises, because of which people were looking for an opportunity to earn money directly from home and with minimal amounts. One of the important reasons for the popularity of Forex specifically in the CIS space is its availability – a large number of brokers, a variety of instruments, conditions and additional pleasant bonuses and promotions. But first things first.
You can learn more about Forex in the video below.
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Highlights about the Forex market for beginners
- A wide variety of brokers, but you need to approach the choice of “your own” responsibly – carefully study its history, offers and trading conditions. It is easy for a beginner who does not understand the markets and intermediaries to run into scammers.
- In a wide variety of instruments (and several markets can be available on Forex at once), you can easily get confused and “overdo it”, but with the right approach and diversification, regular profits are guaranteed. Even in Forex, you can try trading stocks or the most popular indices, oil, gold and silver, as well as cryptocurrencies in addition to traditional currencies.
- The presence of leverage makes trading both more accessible and more risky.
- Unlike stock exchanges, Forex does not have a specific opening time, it is actually around the clock, currencies are traded 24/5, and cryptocurrencies are traded 24/7.
Well, let’s go through each of the criteria that were discussed in the case of stock exchanges. Firstly, this is, of course, the minimum deposit. In the case of Forex brokers, the average deposit for a start starts from $50-100, however, some brokers offer even more pleasant conditions – for example, you can start trading from just $10 using a cent account, which will be equal to 1,000 cent dollars. At the same time, the use of leverage will make the profit real even with the slightest cash outlay.
The second aspect is opening an account. An account is opened with brokers in just a few minutes – just enter basic information such as full name, date of birth and phone number. However, some brokers (mostly more reliable and larger ones) ask to go through a verification process before allowing a client to trade and create accounts. This is just a necessary step to protect your account.
Next on the list are deposits and withdrawals. And in the case of Forex brokers, the maximum available number of methods for depositing and withdrawing funds from an account is presented. This is both a bank transfer and electronic wallets), deposits with cryptocurrencies are supported. The only caveat is to study whether the broker imposes additional commissions for deposits in one way or another.
The next aspect is reliability and safety. And there are some nuances here – since there are a large number of Forex brokers and not all of them work honestly, you should be very careful when choosing your broker. You need to pay attention to the company’s license, its history, study the reviews of the company’s real customers on the Internet – its strengths and weaknesses.
Speaking about the ways of trading, many say that there are fewer of them in Forex – since there is no possibility of obtaining passive income. But in fact, this is far from the case – the modern Forex currency market offers great opportunities. For passive income, you can use either PAMM services (now they have lost their former popularity, although they were really in demand a few years ago), or social trading services (you can earn money on them in a dual role at once – both as a signal/strategy provider and as a follower ). Such services, by the way, are a good option for people who are just starting their Forex path – they help to earn the first capital without the risks of their own trading.
A wide variety of methods are also available for active trading – short-term, medium-term and long-term strategies, scalping, intraday trading, the possibility of using robots and fully automated trading. In general, each trader will be able to find the most suitable options for himself, in parallel, if desired, combining with passive income. At the same time, brokers can provide trading of any assets using MetaTrader 4 or MetaTrader 5 (the most popular Forex trading platforms) and on one account.
Well, we should not forget about various promotions and bonuses from Forex brokers, including the so-called Welcome bonuses for beginners, thanks to which you can increase your starting capital if the conditions are met or start trading on a real account on a deposit from a broker. In addition, various cashbacks, loyalty programs, replenishment bonuses, trader contests, and so on are often offered.
What to choose for a beginner - the stock exchange or Forex?
It is impossible to answer this question unambiguously – yet everyone chooses for himself. However, if you have never dealt with financial markets and want to test the waters for the first time, you should start with the Forex market and the minimum amounts. In addition, Forex brokers have special demo accounts where you can try trading on the real market without your own expenses. But you should not flirt with it – trading with fake money, of course, you will feel confident, and when switching to a real account, the risk of losing your entire deposit against the backdrop of this excessive confidence will increase.
It is worth choosing stock exchanges if you intend to invest your funds profitably in the long term.
Basic Techniques a Trader Should Master
- Try yourself in trend trading – that is, opening a deal in the direction of price movement. This is considered to be one of the best options for beginners, since the risks in this strategy are minimal, it is easy to execute, but at the same time it can bring good profits.
- Do not get hung up on one instrument, always remember to diversify. Let currency pairs for Forex beginners – for example, EURUSD or NZD / USD – be the best solution at the start of trading. But over time and gaining experience, you need to ensure that the portfolio contains various tools for a competent distribution of risks.
- Do not forget about the psychology of trading and self-control. For beginners, any emotions in the markets are especially dangerous, as they can lead to disastrous consequences – no matter if they are positive or negative. You should always monitor your condition and exit the market in time to prevent slipping into tilt or excitement.
- Don’t be afraid to get help. For example, in order to check the correctness of your decision, you can use trading signals. And when analyzing the market, you can and should resort to technical indicators. Find out what it is in the video below.
- Catch up in theory and figure out how stop loss differs from take profit, bulls from bears, why pending orders are created, and so on. Trading is a constant learning and self-improvement, even market professionals continue to develop – that’s why they are so successful.
We hope that after this article, every novice trader has found the answer where it is better to start trading: from the Forex market or the stock exchange. But whatever the choice, we wish you successful trading and profitable transactions!
