Technology is now part of the world we live in and something that positively impacts society. For example, the business world has undoubtedly been significantly affected by technology. Also, the world of investing has become accessible to many new traders due to a digital revolution in the finance industry. This more straightforward access to investing in the world’s financial markets has seen more people putting their spare cash to work.
Of course, if you plan to invest, you need to know where to put your money. This comes down to choosing between Forex trading (FX) and more traditional investing for many people. Forex trading involves investing in the world’s currency market, while conventional investing means putting money into stocks, commodities, metals, or bonds.
Forex investing vs. traditional investing – how are they similar?
One of the main similarities between both types of investing is how you transact the investments. In both, traders use online broker platforms to place, close, and manage trades. As this Pepperstone Forex review shows, there are some great FX platforms to trade with.
This is also true about investing in more traditional assets, where there are some excellent platforms to sign-up with. Many platforms now allow you to invest in FX and other assets from one place! Both types of investing can also have their price/value affected by similar things. Geopolitical and general economic news, for example, could see confidence in a country’s business sector or currency falter. This could, in turn, impact the value of shares or the price of the currency.
Another similarity between these two trading approaches is the use of charts and analysis. Both will see traders studying price action charts to see where things might head next and act if needed. Perhaps the last significant similarity is simply that both forms of investing are done to make money!
How does FX trading differ from traditional investing?
One of the critical differences between FX and traditional trading is that you do not own the asset when trading FX. This investment is usually transacted using what is known as a ‘Contract for Difference,’ and you do not own the physical currency you are trading. More traditional investing can involve buying an asset, such as shares in a company that is likely to appreciate in value, unlike owning the latest tech gadgets, the value of which will depreciate after purchase.
The market hours of each type of investment also differ. FX is a 24/7, five days per week operation giving traders access almost whenever they want. More traditional markets, like stocks, are not open to this extent and do not offer as much freedom in terms of when you can trade. The FX market also allows you to place Buy or Sell orders, meaning you can make money from your asset dipping in value. This is not true for more traditional assets, which only make money if they rise in value.
Leverage is also a critical difference between FX and other traditional ways of trading. You usually have access to higher leverage levels on the Forex market than on others. It needs to be used wisely but does enable you to trade higher volumes, even if you do not have the money to do so. The Forex market is also considered more liquid than traditional investment routes. This can mean it is easier to make quick returns and catch big price moves in your favor.
Investing in FX vs. traditional investing
As the above shows, there are some crucial ways these types of trading differ and may appear similar. The route you head is a personal choice and depends on which you prefer. For those who like fast-paced action and excitement on a liquid market, FX may be the answer. If you want to take a more studied approach and invest for extended periods, more traditional assets may be better. Whatever option you go for, one thing is for sure – technology will be a large part of it. From the online platforms you trade with to the online charts you analyze and websites you use for expert advice, tech is a major part of this thriving industry.