Thread: Is forex trading more profitable than stock trading?

To answer this let’s consider, leverage and margin requirement for both. Leverage is higher in FX, in the US it is 50–1 in the UK and Europe it as high as 1000–1. These leverage ratios make FX appear to be very profitable as you can make money on a large amount of burrowed liquidity. This high leverage and implied volatility means that you will still need a lot of capital to truly take advantage of the leverage. In stocks there is no leverage so you need the cash upfront, this creates a barrier to entry. If you wished to buy Boeing stock you can buy 1 share for a little over $100, if you wanted 1000 shares then you need $100,000. You can however trade stock CFD’s but these are rare with many retail brokers. Stocks are more volatile so the profit potential is higher. As an example I purchased Cosan shares (CZZ) at $2.83, they are now worth over $5 a share and that was under 3 months, so a 100% return in under 3 months. This is not really feasible in FX, volatility is just not the same but none the less this can be done if you trade Option derivatives for example.

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The point of forex trading is simple. Much the same as some other type of hypothesis, you need to purchase a currency at one cost and sell it at a more expensive rate so as to make a benefit. Some perplexity can emerge as the cost of one currency is consistently, obviously, decided in another currency. For example, the cost of one British pound could be estimated as, state, two US dollars, if the exchange rate among GBP and USD is 2 precisely.

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