When it comes to trading and investing, many people wait too long to try different platforms.
Sometimes it takes quite awhile for the average investor to realize just how many avenues there are when it comes to profiting at the market. Each one has different advantages and disadvantages, but not all of them are perfect fits for the way YOU trade and invest.
So which one of these sounds the best to you?
Finding the right way to trade and invest will go a long way toward giving you the best chance to make the most money. If you’re comfortable with a certain type of trading, you will be able to make better decisions and see everything clearer.
So what is best for you? Do you like taking risks to earn bigger rewards? Would you rather master the way to get consistent profits? Would you rather focus on one or two things than on hundreds, or do you like having more options?
You may not even know the answers to all of these yet, and that’s perfectly fine. The good news is that you can try out every type of trading if you want to.
But for now, here are the pros and cons (short version) of some of the most popular types of trading and investing:
Traditional Stocks
Pros: In traditional stock trading, the risk isn’t high relative to other forms of trading, there are hundreds of stocks to choose from within numerous sectors, and consistent profits are attainable with the right trading system.
Cons: With traditional stock trading, you normally don’t get much leverage, so big-gain potential is less than in other trading forms. You also have to wade through all the terrible advice out there—70% of ‘professionals’ can’t even beat the market benchmark S&P 500.
Forex- Foreign Exchange
Pros: In currency trading, massive amounts of leverage are available, so you could control $50,000 with a $1,000 investment in some cases. This means you can see big returns for small price changes. There is also no commission you have to pay to brokers, and the cost to trade is generally low. Plus, there are only a handful of currency pairs you need to pay attention to in forex trading.
Cons: The massive leverage also means a small price change could wipe out your trade, and in some cases accounts can go negative. And if you want to be regularly involved in different currencies, there is a relatively large amount of research to do.
Options
Pros: Options are contracts to own or sell stock at a future date. Options can give you additional leverage when trading, or they can serve as insurance for your current investments. They are relatively inexpensive and are more regulated than the forex market.
Cons: Each options contract includes 100 shares, so the if you buy three contracts to control 300 shares for $600 and the price goes the wrong way, you are simply out $600. Options are also more complicated for new traders, so a learning curve will take some time.
There are also other types of trading and investing, such as futures and commodities, but I wanted you to get a good look at the three most popular types first.
Again, finding the most suitable one for you is a huge step in giving yourself the best chance to succeed when trading and investing.
