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Chapter 2, Part II. And what about the stock market?

Discussion in 'Complete Trading Education- Forex Military School' started by Administrator, Mar 8, 2011.

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  1. Administrator

    Administrator Just Administrator :-)

    Sep 24, 2007
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    Part II. And what about the stock market? [​IMG]
    Pipruit: Sir, I still have some concerns. Yes, we’ve investigated and seen that the FOREX market is the most liquid and huge and is the best of the best, etc. But, the majority time on TV financial news is about stock markets and other stuff that is linked with stocks. Is it correct to compare these markets from the trading point of view?​


    Commander in Pips: Not quite, because these markets have absolutely different purposes, this is almost the same as compare fish advantages to bird advantages. But during recent times some myths have appeared concerning FOREX and Stock market comparison. Besides these, there are some points that could be used in comparison, because they are common for any trading market. These things have nothing to do with the nature of particular market, but refer to technical issues of market functioning. I mean timing, fees and other things.

    Pipruit: Well, this should be even more interesting than I thought.
    Commander in Pips: I hope you’re right, so let’s get started on Stock vs. FOREX myths to find the truth…

    MYTH #1 The FOREX market is simpler, because the stock market includes about 8000 stocks (NASDAQ and NYSE listing together), and it is difficult to decide, which one should be traded.

    Neither true nor false

    This is an excellent example of confusing market purposes. First of all, to own a stock is a quite different than to own a currency. Owning a stock gives you the rights of participation in company governance and on a share in its income. Owning the currency is quite a different thing.

    And what if you do not intend to hold any stock or currency for a long time and your target is just a speculative income. That’s ok - from trading perspectives and speculative approach to trading, there is no difference which stock to trade, because the major condition for speculating is liquidity. Take any share of a large company (so-called blue chips) and you will almost always have sufficient liquidity for speculation. If you do not know yet what stock to choose – that’s fine you can trade the whole stock market with stock indexes futures, like an S&P500 that includes 500 most large companies or Dow Jones. Or you can buy shares of index mutual fund, or even an ETF that specialized on stock markets.​
    b0b21, Nachoga, TOURADA and 3 others like this.
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