Choosing which Market is Best to Trade
With the advent of the forex market, the list of ideal markets to trade has just gotten longer. And for the unacquainted trader or investor, choosing might be difficult. Let’s discuss some of your possible options.
Different Markets, Different Choices
There are times when a trader isn’t even fully aware of his choices when it comes to investments and trading instruments. The truth is there are a lot of options.
The stock market is perhaps the most popular market for investors and traders. Trading and investing with the stock market involves buying and selling shares of a company.
Exchange traded funds are funds that represent all sorts of sectors, industries, currencies, and commodities. ETFs trade similar to stocks so they can be bought and sold quickly or just be held for longer.
The foreign exchange market is considered the largest and the most liquid market in the world. This market facilitates the exchange of one currency for another, which means they are always traded in pairs.
This is a market which lets participants take positions using derivatives of an asset. That means owning an options contract doesn’t mean owning the underlying asset. However, the option price fluctuates with the value that the underlying asset is providing.
Although there are many other markets out there, the above mentioned markets are the most easily accessible ones as long as you have internet connection. Each of them offers different advantages and disadvantages and traders can choose depending on their preferences and conditions.
Which Market is best for Trading?
There are many factors to consider when deciding which market to trade, such as financial resources, background, schedule, financial goals, investment horizon, and risk tolerance.
Markets for Short-term Traders (Day Traders)
The forex market
The forex market has seen a steady increase in turnover since the start of the new millennium. This meant higher number of day traders opening accounts with the forex market and CFD brokers, which have also seen a rise in numbers.
The most appealing quality of the market is the low minimum required to start trading. You can open an account for as little as $100 and you may even trade global currencies, indices, and commodities.
The ETF Market
Exchange traded funds are now letting traders to partake in currency moves by making trades on the stock exchange. Even though it will cost more to day trade with a stock/ETF account, it also lets you trade with leverage.
That means you may take some additional risk/reward for each price movement. As an ETF trader, you are also not required to pay the spread. Rather, you may sit on the bid, offsetting commissions and improving your profits.
ETFs also allow you to take part in other markets like oil, gold, silver, and stock indexes.
For Long-Term Investors
For longer term investors, the commodities market may be an excellent choice. However, many of them are probably not familiar with the futures market. Additionally, they usually don’t have enough currency exposure.
After getting familiar with the forex market, the investor might make use of it to gain currency exposure. Also, CFDs can be used for longer term traders since the bid/ask spread is minimal over a longer time frame. This provides the benefits of the options, minus the time frame. Get the Wibest Best Brokers to help with WibestBroker Stock Markets