If you've been invested in stocks, but you're new to Forex, let's take a look at how Forex compares to owning stocks. To keep it simple, let's say that you have $10,000 in your account and you want to put 60% of that money to work and you decide to put $1,000 into 6 different stocks. For example, here's a list of the stocks along with their prices:

If you were to buy Intel at the current price of $14.00, you'd be able to buy 72 shares for just over $1,000. If you were to choose GE, you'd be able to buy 80 shares, etc. As you can see, you could easily invest $6,000 into these blue chip stocks.

On average, the U.S. stock market moves up or down by around 1% a day. Certainly there are days when the entire market will move 2% or more, but on average, the net change on most days is around 1%. Thus, each of the 6 stocks is likely to increase or decrease in value by around $10 a day.

One advantage of investing in stocks is that you can close your position any time you want (provided of course that the market is open).

In summary, investing in stocks has the potential for very small profits and a reasonable amount of safety.

Next, let's compare investing in stocks to trading Forex.

We don't recommend doing this, but for purposes of this example, what if you were to allocate the same $6,000 to 6 different Forex markets.

Compare this table to the previous table. The obvious difference is the far right column titled 'Average Daily Change'. The column titled '$ Required for the Trade' is the margin and the average daily change is an indication of the leverage that is possible in Forex markets. For a small amount of money, you have the possibility of much larger profits, and because the Forex markets are available 24 hours a day, you can close out your position almost any time you want.

Keep in mind, in the Forex markets it's not a good idea to tie up more than around 10% of your account at any given time. If you have a larger account, let's say $25,000, you could comfortably trade one standard Forex contract or maybe even two. But, in a $10,000 account, you should start out by trading a mini contract.

Forex vs. Futures

To compare Forex to trading futures, let's take a look at the next table.

If you compare this table to the Forex table previously, you'll see that the biggest difference is in the column titled '$ Required for the Trade'. Although the 'Average Daily Change' is comparable in most cases to Forex, the margin requirements in the futures makes these trades difficult to do.

Another disadvantage of the futures markets is that you must enter and exit your trades during limited market hours. If a market happens to move too much during any given day, you may find it necessary to wait until the following day to exit a losing trade. This can never happen in the Forex markets.

Large Potential Profits for a Small Amount of Risk

The three tables just presented illustrate how huge profits can be made for a small amount of risk and, most importantly, it can be done with an extreme amount.