Trading Property vs Trading Currencies

Lay off the bricks and mortar people, it’s time to look seriously at why you should be trading foreign exchange instead. Kiwis have always had a love affair with property, but new measures introduced by the RBNZ last Wednesday will soon make it harder for property investors to trade property within the Auckland region. Take it from this “reformed” property investor that the days of easy money on property are over, and trading property is now a game best left to those with deep pockets.

So if your pockets aren’t as deep, what other options are there for you?

I’m going to do a bit of a plug now for trading currencies because it is actually very similar to trading properties, plus a few sweet advantages. For me, it made sense to look into currencies because the primary drivers in this market are interest rates. Since I was already looking closely at interest rates for my property deals, it was not hard to make the switch to currencies after I sorted out my trading strategy.

Like trading property, it is vital you have a clear defined strategy you can apply to trading currencies. When creating your strategy, you should ask yourself questions such as, but not limited to the following: Are you a day trader or a swing trader? How much capital do you plan to trade with? How much risk are you going to take on each trade? How much time can you spend each day searching for trading opportunities?  

Trading currencies also involves leverage. However unlike property, you do not need to get pre-approvals from the bank or take out a mortgage as the leverage is provided by the broker you choose to trade with. Also, since the leverage factor is based on the liquidity of that particular currency pair, you do not have to provide your broker with pay slips or financials. However, do note that you can only trade with cleared funds in your brokerage account. This greatly reduces the time you need to get into the market and is also less capital intensive than trading property. (Disclaimer: leverage trading involves high degree of risk. Please make sure you understand this risk thoroughly before you invest. You may lose more than your initial deposit.)

Some key differences to note, trading currencies is much faster paced than trading property. Property is a relatively illiquid asset, and it is geographically limited. Conversely, it is possible to trade currency from anywhere in the world, at any time as the market is open continuously (excluding weekends and some public holidays) for electronic trading without a physical trading centre; currencies are undoubtedly the most liquid asset class available! This is a huge benefit as this massive liquidity makes it easy for traders to enter and exit a trade, with very little transaction costs and slippage.

Lastly, there is a wealth of technical indicators available to help you analyse trends and opportunities on currencies. Here at Trade with Precision, we use multiple factors of confirmation to help us select only the best trades. Compare that to trading properties where the information you need is held by different agencies and hard (i.e. expensive) to obtain. How can you be sure then that the property you are purchasing, an asset you’re paying $500,000 for (or more if you're buying in Auckland) is going to appreciate further?

Are bricks and mortar still looking attractive to you now? 

Regards,
The TWP Team