Stock Exchanges VS Forex

Out of the brokerage currency market Forex, originated in the 70s of the last century, is rapidly developing and has become a «dangerous competitor» to classic exchange markets. This trend manifested itself with the advent of the opportunity to trade on Forex not only with currency pairs, but also with assets that were previously available only on stock and commodity exchanges. Investors get an opportunity to assess the advantages and disadvantages of working on different financial platforms and to choose the optimal options for investment activities.

STOCK EXCHANGE — ENTRANCE WITH «EXPENSIVE TICKETS»

The stock market offers investors to place capital in various securities, the most popular of which are shares of companies. The acquisition of shares has several objectives:

• participation in the capital of the company;
• receiving income from dividends;
• receiving profit from the sale under the growth of the exchange value.

The technical side of the issue does not cause complications – a client purchases shares through an authorized broker with whom the potential trader enters into an appropriate contract. All other actions require the presence of two necessary conditions: a decent start-up capital (the minimum entry threshold can be from $1000,) and the stock of knowledge well above the baseline.

WHERE TO BUY SHARES OF THE WORLD’S LEADING CORPORATIONS

Traders perform operations on stock exchanges with the help of electronic systems and the broker provides the necessary trading terminals. It also determines the list of trading platforms to which a trader can get access. The stock market has its own rating of exchanges. The «hot five» looks like this:

1. NYSE (United States);
2. NASDAQ (USA);
3. Tokyo Stock Exchange;
4. London Stock Exchange;
5. Shanghai Stock Exchange.

American stock exchanges will allow the investor to become a shareholder of such companies as Boeing, Coca-Cola, Tesla Motors, Facebook and many others of the other leaders of the world industry.

The Russian stock market is represented by 10 exchanges (real trades are only conducted on 3 exchanges). The most popular is the Moscow Stock Exchange (MICEX — RTS), which is included in the world’s 20 largest stock exchanges.

TRADING PLATFORMS DESIGNED FOR WORKING WITH STOCK EXCHANGES

The stock market require the trading terminals to be similar to the Forex market terminals but due to the large number of «points of trade», such platforms should provide the opportunity to work in parallel with several exchanges and the assets quoted on them.

QUIK

One of the most convenient and popular platform among Russian trading platforms. It features a convenient interface, lots of functions and has a large selection of technical analysis indicators. This terminal provides direct access to the Russian stock market. Some brokers charge a monthly fee for the use of the terminal.

Aurora

The platform gives traders an ability to conduct trading operations on the Russian and American stock exchanges. Beginners get a special functionality and a simplified interface as a starter.

Among the popular platforms in Russia are the following: Laser, Rox (give access to the American stock market), Sterling, Fusion, DAS.

TRADING IN SHARES AND FUTURES

Trading these tools has different mechanisms. The concept of a share implies a document that is established at the legislative level and assigns to it a number of mandatory rights. Futures is a contract for the supply of a certain number of shares, with a maturity of 3 months. When the time expires, a new 3-month futures contract comes into circulation, etc.

 EXAMPLE OF A FUTURES CONTRACT

Shares and futures for Gazprom are traded in parallel, but in different markets. Shares — on the spot market, futures — on the urgent. The price of assets is approximately the same.

Buying a company’s futures, a trader assumes that the price will rise. The seller of the futures calculates the drop in the value of the futures. When dealing with shares, the same thing happens. The principal difference lies in some other things.

For example, the stock price is 160 rubles, and then the futures price will be 16,000 rubles. (one Gazprom futures contract includes 100 shares). To purchase futures for 100 shares you do not need to pay the full price — 16,000 rubles. It is enough to make the GO (guarantee coverage, for 12-13%), because not the securities themselves are bought, but only the «dispute» on them (they will rise or fall). As a result, to buy 100 shares in the futures market, you need 2000 rubles. (the price of the stock is 160 rubles). On the spot market, for the same 100 shares, you have to pay 16,000 rubles.

Compare the two accounts on the spot and futures market, with the same starting amount of 16,000 rubles.

In the 1^st account you can buy 100 shares at a price of 160 rubles. In the 2^nd account you can buy 800 shares (8 futures for 100 shares, taking into account GO).

Within 4 days the share price increased by 5%, while the 1^st account increased by 5%, and the 2^nd one — by 40%. The peculiarity of the futures contract can be observed here. The variation margin is calculated as if the trader bought 800 shares, even though there was not enough money on his account (in the spot market, in order to get the same profit — 6,400 rubles, it was necessary to have 128,000 rubles).

The forex market FORTS, which trades futures for stocks, rather than directly shares, has a significant advantage due to the so-called built-in leverage. This mechanism allows you to conduct aggressive speculative game with significantly less capital than when working with shares.

FOREX TRADING

Participants in the Forex market can trade shares with the help of CFD-contracts. Due to this instrument, there is no need to have a large deposit to purchase shares (without CFD, the entrance to the deal required hundreds of thousands of dollars). CFD contracts do not specify specific delivery times and do not imply the transfer of ownership of a financial asset. A trader can profit not only from the difference in prices, but also from dividends on shares.

With the help of such contracts, a trader can play for both increase and decrease, which a trader cannot perform using traditional trading methods.

Simplified registration and opening of a trading account, minimum requirements for a start deposit, the ability to use automatic trading, leverage, make the Forex market a favorite place to start trading.