Trading

Forex Vs Stock Trading

by Fintech News Malaysia April 18, 2019 0 comments

Beginners and experienced traders are provided with a wealth of options to choose: how to trade, where to trade and what to trade. Starting the way on the exchange, traders often have to make a choice between the stock market and the foreign exchange market.

The mechanism of trading on forex and the stock market are somewhat similar. Prices are based on supply and demand, the types of transactions are the same. However, the difference between them is very significant. Let’s figure out the nuances of trading in both Forex and the stock market.

Assets

Forex is an international over-the-counter market, where currencies are traded. Currency pairs are a basic trading instrument on Forex. Financial market participants can also work with precious metals. Stocks, futures, bonds, options are traded in the stock market. In simple terms, the stock market involves trading with any type of securities, while the Forex market – currency trading.

Trading marketplace

New York Stock Exchange via Unsplash

All stock markets are exchange-based. The trading marketplace is the stock exchanges, which are located in the world’s largest financial centres. New York Stock Exchange (NYSE), NASDAQ, Tokyo Stock Exchange are one of the major stock exchanges.

Unlike the stock market, the Forex market is an independent marketplace and has no specified location. Transactions are conducted through special trading platforms.

Working hours

Stock exchanges work according to a specific schedule. Unlike the foreign exchange market, where you can trade 24/5, stock trading is available only 8 hours a day depending on the work schedule of stock exchanges. So, investors from different countries of the world often have to adjust to the time of work and the time zone of a particular stock exchange. Forex traders can choose the most convenient time for trading.

Market accessibility

You can start trading even with a minimum amount in the foreign exchange market. That makes forex trading more accessible to the speculators with small initial capital. Whereas in the stock market the situation is different and stock trading requires a much bigger capital.

In addition, account opening, withdrawing and depositing funds is easier compared to more complex processes in the stock market.

Forex brokers often offer their clients various bonuses that provide traders with the opportunity to increase profits and receive valuable prizes. For example, an Exclusive Isra Miraj Sale is valid now at JustForex. So, you can open ECN Zero and Standard accounts with 50% discount till April 30, 2019.

Liquidity

Forex is the largest and the most popular financial market in the world. It is considered to be highly liquid market with large volumes. In comparison with the stock market, trading volume in the foreign exchange market is much higher. This means that you can sell or buy any currency on Forex in just a few seconds.

Leverage

Leverage allows accessing financial markets with a small capital. Forex trading usually has a higher leverage ratio, while in the stock market this figure is significantly lower.

For example, if you invest $100 with a leverage of 1:500, you can operate with a sum of $50 000. So, in this respect, the possibilities on Forex are greater. However, it should be remembered that on the one hand, the use of financial leverage is a potential profit, on the other, – possible losses.

Analysis

Forex trading involves forecasting price movements, taking into account various economic factors: the inflation rate, the interest rate of central banks, GDP data, etc. When trading stocks, it is necessary to monitor the activities of the organization itself.

Commissions

The basic commission on Forex is the spread – the difference between selling and buying prices. Unlike stock brokerages, they do not charge additional commissions or transaction fees.

Which market is better? To choose between Forex and the stock exchange you should take into account differences between these markets. High liquidity, low entry threshold, as well as round-the-clock work of the Forex market make it attractive to speculators. In general, each of the exchanges provides good opportunities. Forex and stock are interesting and can bring stable profits, but the final choice is yours.

Featured image credit: Pexels