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Markets Comparison PDF 

 

 

Advantages Of Forex:

  • 24-hour trading, 5 days a week with non-stop access to global FOREX dealers.
  • An enormous liquid market making it easy to trade most currencies.
  • Volatile markets offering profit opportunities.
  • Standard instruments for controlling risk exposure.
  • The ability to profit in rising or falling markets.
  • Leveraged trading with low margin requirements.
  • Many options for zero commission trading.
  • Easily accessible and attractive for the investors of different levels.
  • Protect your revenues from foreign currency transactions by hedging against exposure to adverse rate movements.
  • Trading Forex has much lower transaction costs than other investment products, a very important point for active traders.
  • The market on which money are assets, have highest of all possible liquidities.
  • It allows to avoid a problem of the instability, existing in futures and other share investments where during one time and for a determined price can be sold only the limited quantity of contracts.
  • The FOREX market is so vast and has so many participants that no single entity, even a central bank, can control the market price for an extended period of time.
  • Determination of the maximum loss by using stop loss.
  • Trading using an easy & fast platform.
  • All transactions are over the counter (OTC) that there is no specific location for the market.
  • The Market affected only by the supply & demand.
  • Real time charts.

Forex Vs. Options

Options are financial instruments that convey the right, but not the obligation, to engage in a future transaction on some underlying security. For example, buying a call option provides the right to buy a specified quantity of a security at a set strike price at some time on or before expiration, while buying a put option provides the right to sell. Upon the option holder's choice to exercise the option, the party who sold, or wrote, the option must fulfill the terms of the contract.

Types of options:

Exchange traded options (also called "listed options") is a class of exchange traded derivatives. Exchange traded options have standardized contracts, and are settled through a clearing house with fulfillment guaranteed by the credit of the exchange. Since the contracts are standardized, accurate pricing models are often available. Exchange traded options include:

  1. Stock Options.
  2. Commodity Options.
  3. Bond options and other interest rate options.
  4. Index (equity) Options.
  5. Options on futures contracts.

Over-the-counter, or OTC options are traded between two private parties, and are not listed on an exchange. The terms of an OTC option are unrestricted and may be individually tailored to meet any business need. In general, at least one of the counterparties to an OTC option is a well-capitalized institution. Option types commonly traded over the counter include:

1) Interest rate options.
2) Currency cross rate options.
3) Options on swaps or swaptions.
 
Employee stock options are issued by a company to its employees as compensation.

      Forex        

  Options  

Largest and most liquid market in the world

Liquidity depends on underlying asset & expiry date

24-hour trading action for 5.5 days a week

Not 24-hour. Varying trading hours based on the exchanges 

Easier to calculate stop beforehand

Difficult and unreliable to place stops on underlying asset 

Minimum slippage and order errors

More room for slippage due to lack of liquidity

100:1 leverage on standard-sized accounts

Leverage depends on the type of option transaction you want to engage in. Selling Naked Calls or Puts generally requires a huge amount of margin

No commissions

Commissions on every trade

Most liquid market in the world

Limited liquidy

Limited risk, most forex brokers will automatically close your positions when your account balance goes to zero

It is possible to have a negative balance if you write an option 

Instant executions, all-electronic market

Delayed fills possible






Forex Vs. Futures:

Futures is Exchange traded contracts are not issued like securities, but they are "created" when one party buys (goes long) a contract from another party (who goes short). In the beginning there are no contracts, so the number of long contracts must equal the number of short contracts. This always goes through the exchange, which means that the exchange is the counter party for all trades. However, the exchange does not take any net positions. In this way clients do not know with whom they have ultimately traded. Compare this with securities, in which an issuer issues the security. After that, it is a legal entity that is traded independently of the issuer. Even if the issuer buys back some securities, they still exist. Only if they are legally canceled can they disappear.

                Forex              

 Futures

 Largest and most liquid market in the world

 Liquidity dependent on month of traded contract

 24-hour trading action for 5.5 days a week

 Varying trading hours based on the markets

 Can profit in both bull and bear markets

 Tend to have extended bearish periods

 Can short-sell anytime

 Trading restricted by limit up/down rule

 Minimum slippage and order errors

 More room for slippage and error

 100:1 leverage on standard-sized accounts

 Smaller leverage

 Extremely low margins 1% or better

 Higher margins usually 5-8%

 No commissions

 Commissions on every trade

 Most liquid market in the world

 Limited liquidy

 Instant executions, all-electronic market

 Delayed fills possible in open markets

 No limits on market moves

 Some markets have maximum daily movement limits that can trap you in losing position

 Usually free streaming quotes

 Expensive fees for streaming quotes




 

Forex Vs. Stocks:

 

 Forex

                Stocks                 

24 hour market

 Open only a few hours a day

Most liquid market in the world

 Limited liquidy especially in the smaller capitilzation stocks

High leverage
100:1 leverage on standard-sized accounts

 50% leverage at most
2:1 leverage to the average stock investor

Slippage is usually very limited

 There is usually slippage on every order

No commissions

 Commissions on every trade

Can go long or short easily

 Harder to go short with uptick rule and possiblity of borrowed shares being called

Can make as many trades you want

 Daytrading limitations on how many trades you can do in a period of time

Limited risk, most forex brokers will automatically close your positions when your account balance goes to zero

 It is possible to have a negative balance after an adverse move in the market

Minimum slippage and order errors

 More room for slippage and error

Can short-sell anytime

 Need to obey uptick rule in order to short-sell

 Minimum slippage and order errors

 More room for slippage and error