Can the Stock-Market-Trading be Replaced by the Forex in our Investing Portfolio

The Stock-Market-Trading, or the Forex Trading

Many see the Forex Trading Market as very dangerous.
It has a reputation of failing for 90% of the traders involved in it.
What we are not told though is that 90% of new businesses in all fields, fail as well over time.

This does not mean that trading the Forex is safe.
But, if I have money to invest, I will spread it in different channels.
The majority in solid trusted ones, like savings or government Bonds, knowing that the return on my investment will be guaranteed but only around 4% to 6% yearly.
Part of my investment I will definitely put in a more volatile channel like the Stock Market Trading or the Forex.
Being aware of the dangers, but expecting substantial returns.
Sometimes 10 times or more what I can get in the solid investments.

The question now is where do I invest?
The Stock Market Trading or the Forex.
Let's compare the two:

Size: The Forex is the largest existing Market, 3 trillion US$ daily.
The NYSE and the Nasdaq together, only 150 billion US$ daily. (1:20)
Meaning many, many more trading opportunities in the FX.
And interference in the Market by interested elements almost impossible.

Liquidity: The Forex operates 24 hours daily, 5 days a week.
The NYSE and the Nasdaq 6.5 hours a day, 5 days a week.
Freedom to trade whenever you want, no restrictions in the FX.

Execution Cost: In the Stock-Market-Trading 0.1$ for 1 share.
In the FX 3 to 4 Pips a Lot for most of the Pairs. (1:10) Much cheaper.

Leverage: In the FX up to 1:400. In the NYSE and Nasdaq up to 1:4.
Meaning you can finance your trades from the leverage the Broker assigns to you. Beware of course of this double edge sward.
When you are in loss, your losses are leveraged as well.

Influences: Unlike in the Stock-Market-Trading, the news that can affect a Market are reaching everyone at the same time in the Forex.
No one can use inside information to manipulate his Trades to his benefit.

As we can see, in all aspects the FX is preferable.
Why is it then, that the majority of the traders still think otherwise.
I assume, without having investigated the issue scientifically, that the main problem is psychological. I have been there in the Stock-Market-Trading and in the Forex.
Most traders involve their emotions when trading, rather than their logic.
And emotions tend to swing between greed when in profit and fear when in loss.
There are exact mathematical rules to trade the Forex.
Whoever follows these rules to the letter, enhances substantially his winning odds.

And the rules are:
1. Avoid all personal feelings from influencing your decisions.
After entering a trade, do not follow the swings of the currencies in your computer. Never make changes to a trade in progress.

2. Never enter a trade without Stop Loss, to limit your losses if the market moves against you.
Always know how much losses you can afford and act accordingly.

3. Always trade the same Value in order to keep your Profits and Losses balanced. You would not want the loss of one trade to surpass the profits of two other trades.

4. Focus on a small number of Currency Pairs to trade. Specialize in them.

5. Manage your account intelligently.
The loss of one trade should never be more than 3% the value of your account. The reason being that even if you encounter 15 consecutive losses, (statistically very rare), you will still remain with 55% of the value of your account.

6. Invest in your Portfolio no more than 20% the value of your account, and never exploit the leverage your Broker provides you, when using Directional Trading.
Use around 1:10. Never more than 1:20. Again, this is to safeguard your account against possible consecutive losses.

The laws of statistics apply to all aspects of life, including the Stock-Market-Trading or the Forex.
For example, if you make a large enough number of blind trades you will get 50% losses versus 50% profits.
Meaning that even without any knowledge at all, by applying the rules stated earlier for the Forex, if you trade long enough you should be able to keep your account balanced, but for the spread you would have paid to your Broker.

For a numerical Forex Trade Example,go to the Forex Demo page.

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