Why You Should Day Trade Forex Instead of Stocks

Today, we’re going to cover 3 reasons why day trading FX is easier than trying to day trade stocks. Forex is an especially good choice for new day traders who have less than $25,000 to start.

#1) You don’t need to search far to find something good to trade

What makes for a good trade?

Ultimately it comes down to two things:

Volatility and Volume.

With high volatility, this means the price can move enough for you to earn a decent return.

With high volume, there is more liquidity, which means that there is a greater likelihood of your orders getting filled because someone will be there to take the other end of your trade.

Usually, high volume correlates with high volatility 

So when a day trader goes to find stocks to trade after the market opens, they are going to have to choose among thousands of potential stocks to find that high volume and high volatility.

Now, any good day trader of the stock market will likely use a scanner to find these desirable stocks. However, even with this tool, she will still need to make a decision as to what deserves her focus.

Sometimes this means watching multiple stocks all at once.

* Note: A Key to keeping trading simple and easy is to limit the number of decisions you need to make during your trading session

With forex, on the other hand, there are only 8 major currency pairs to trade.

And when I say major, I literally mean Major – The most actively traded currencies that pair with the US dollar are called the Majors: These include pairs such as the EUR/USD and USD/JPY. 

**WANT TO SEE THE REST OF THE PAGE THAT THIS LIST COMES FROM? DOWNLOAD THE VISUAL GUIDE TO FOREX TRADING HERE**

Note: A currency pair with one currency traded against another is the unit we trade in FX, like how one stock in a company is a unit traded in the stock market. 

So on any given day when trading FX, it’s super easy to find where the action is.

Every day trillions of dollars are traded in FX markets – you don’t have to look far to find that high volume and high volatility.

In fact, if you’re like me, you pick and trade only one currency pair as your strategy. I personally trade only EUR/USD at a time of day when this pair is most active.

Nothing else

#2) FX market is open almost 24/7.

See, the US stock market, on the other hand, is limited to about three or four hours of ideal opportunity.

If you work or go to school during the hours that the stock market is open, you’re not going to be able to day trade.

With foreign exchange markets, you get to choose when you want to trade. Because it’s an international market, there is always a market open somewhere in the world.

For example, if you trade in California and you’re nocturnal, then you can look into trading something like the GBP/USD around midnight when the London exchange opens. 

Since good day trading revolves around good trading behaviors, it helps to be able to trade when you have time and can be in a space where you can sit and focus without any distractions. Forex markets provide that kind of accommodation

#3) The FX market can be a bit more stable than the kinds of stocks most beginners can afford to trade.

For example, a lot of beginners are attracted to trading penny stocks – I know I was when I first started out trading.

However, these stocks are super volatile and just as quickly as one may make you a huge profit, so too, it can turn around and drain your account dry.

That level of volatility is also really emotionally stimulating and it can be harder to stick to your rules under such pressure. Sure, there are bigger stocks to trade that are less volatile, but often beginner traders can’t always afford the price of entry (example: TSLA is currently priced at $679.70).

Forex, on the other hand, tends to make cleaner and easier moves that you can time.

On our path to consistent profits, we want to be sure to trade instruments that also exhibit a degree of consistency. 

This leads us to our bonus reason  

#4) WITH FX YOU CAN MAKE AS MANY TRADES AS YOU WANT WITH ANY ACCOUNT SIZE

For those who are familiar with stock market rules, there is something that regulators came up with called the Pattern Day Trading Rule – This PDT rule prevents anyone with less than $25k in their account from taking more than 3 day trades…a week!

That means you can enter and exit a trade on the same day only three times a week.

If you’re looking to become skilled in day trading, you’re probably going to have to wait a long time to build your account up enough to be able to achieve a consistent routine with day trading. 

Forex, though, is far less regulated. You can trade multiple times a day whether you have $25k in your account or just $500. However, it’s not a good idea to constantly be trading just because you can

(Note: Profitable day traders limit themselves to about 2-6 trades on any given day, so long as certain conditions are met. )

But, having that freedom to day trade gives you the opportunity to practice the right habits early and make more money than having to learn how to swing trade then learn to day trade, since the key habits and skills for each of these trading types do differ. (There’s a different kind of psychological tug when you have only a minute to make a trading decision versus a few hours or days for swing trading and investing.)

Okay folks, we are at the end of this lesson. Today, we covered three reasons why day trading forex is easier than trading stocks because you don’t need to search far to find a good trade, the fx markets are open nearly 24/7 allowing you to trade on your own time, and the currency pairs tend to be less scary volatile than the kinds of stocks most beginners can afford to trade. Lastly, we discussed how the PDT rule in the stock market prevents small account traders from day trading while Forex is available to day trade for all account sizes.