Forex vs Stocks: Which Investment Method is More Suitable for Beginners?

Forex and stocks are two different investment tools, each with significant differences in aspects such as trading hours and leverage. Below is a Forex investment tutorial for beginners, designed to help newcomers understand whether investing in foreign currencies or stocks is more suitable for them.

First, let’s ask ourselves three questions:

1. Is my day job very busy?

2. Am I aiming for profits in a short period of time?

3. Do I want to start with a smaller amount of capital?

If the answer to all the above questions is yes, you might consider getting to know Forex margin trading. Forex trading involves buying and selling currencies issued by countries, just like we use local currency when traveling. There are eight major currency pairs in the Forex market, including the US dollar, euro, Japanese yen, British pound, Swiss franc, Australian dollar, Canadian dollar, and New Zealand dollar. Compared to the numerous stock products on the market, these currency pairs are easier for investment beginners to become familiar with and learn.

Introduction to the Forex Market
In Forex trading, profits and losses come from fluctuations in the 24-hour currency exchange market. Unlike stocks, foreign currency exchange rates are not affected by human decisions or company operations; the volatility of the Forex market is relatively higher than that of the stock market, thus providing investors with short-term investment opportunities.

Investors can choose to buy or sell foreign currencies based on global market conditions and personal preferences. Therefore, whether the price of foreign currencies rises or falls, you have the opportunity to profit. This is the advantage of “two-way trading” in Forex margin trading. Additionally, investors can use leverage to increase capital efficiency and gain greater returns at a lower cost. It is worth noting that the minimum trade size in Forex trading is 0.01 lots, making it a suitable investment tool for beginners to try their hand.

Here is a simple calculation formula:

Minimum Margin (USD) = Exchange Rate × Contract Size × Number of Lots ÷ Leverage Ratio (Emperor Financial offers 20 times leverage)

Trading Amount and Profit/Loss (assuming an exchange rate of 1 euro equals 1.08500 US dollars):

From the above example, it can be seen that the transaction cost of Forex margin trading is lower than that of traditional Hong Kong stocks. For instance, purchasing one lot of Tencent’s regular shares requires about 40,000 Hong Kong dollars, and you would need to wait for its stock price to rise by 100 Hong Kong dollars to gain a profit of 10,000 Hong Kong dollars. However, if you use the same margin to purchase one lot of euros, you only need the euro to US dollar exchange rate to rise by 0.01 US dollars to obtain a profit equivalent to purchasing one lot of Tencent’s regular shares and having its price rise by 100 Hong Kong dollars.

How Should Beginners Choose the Most Suitable Investment Tool?
Whether you are an investment novice or an experienced investor, you should decide on the best investment portfolio based on your personal habits and risk tolerance. Everyone’s situation and goals are different, so an investment portfolio that suits you may not be suitable for others. If you want to learn more about how to operate Forex trading, you are welcome to sign up for the free courses regularly held by Emperor Financial. These courses will help you understand market operations, learn how to seize the right moment to enter the market, and provide practical investment tips and strategies.