Stocks or forex
December 20th, 2009
Is trading penny shares riskier than currency trading? This isnt an easy question to answer. Personally I think they are too different to say which is riskier. Currencies are often traded on margin. Some currency trading brokers actually allow leverage up to 500:1. This amount of leverage can very quickly blow up an account.
Penny stocks can move very rapidly and also eat into a trading account.
One big advantage of currencies is you can easily choose how much leverage you want to use. If you have an account size of 10k. You can easily place trades that are equal to your ,000 or use leverage.
One advantage of forex is that there are often no trading commissions. With stock trading you usually have a set fee for a each trade. Many online penny stock brokerages also charge additional fees for trading penny stocks. This can mean you have to earn good returns just to pay the stock broker their fees.
If you trade currencies through many retail forex brokers, they do not charge commissions. They make their money their the buy and sell (bid/ask) rate spread.
Trading both penny shares and currencies is very high risk. Be sure to take your time when choosing a broker. For stocks a discount stock brokerage is often best suited. For currencies a good solid retail broker with a solid reputation and low spreads is often the best bet.
Be careful with forex brokers though, they are often not heavily regulated and they have been known to go bankrupt. You could have heard of the broker refco, they went bankrupt a few years ago. Many account holders lost all of their funds.
One thing you can do is try a simulated stock trading account before trading a real account.
Think of how terrible it would be if you lost your entire trading account because of your broker going bust!