Stocks Vs Forex
Trading is one of the markets that are famous across the world. You will find numerous people who are involved in trading! But we feel you are really confused about what to choose: Stock or Forex? Do not worry. We are here to help you out to find the difference between the two. These differences will help you choose the best one for you.
Stocks and Forex both have different exposure and different marketing strategies. Forex or foreign exchange market is one of the booming markets and has a fast-paced marketing structure, and on the other hand, stock trading is buying and selling of the shares and earning profit from that. There are forex market investments by central banks, investment banks, hedge funds, commercial companies etc. On the other hand stock market is carried on the basis of business decisions, market sentiments, economy etc. There are two different types of stock traders like intraday (short term) traders and delivery (long term) traders. This estimation is often required to compare forex and stocks and identify the more profitable market. We have to understand the trading styles to determine the market and to strategise plans to implement.
There are few major differences between the two trading markets, stock and forex. Let us check the differences.
The market size is one of the major differences between forex and stocks. The Forex trading market is huge as compared to the Stock market. Five trillion dollars trade is generated each day from Forex trading on group500. There are major Forex trading pairs like EUR/USD, USD/JPY, AUD/USD and GBP/USD. The volume of the forex market dwarfs the volume of dollars generated from the stock market combined. The rough estimate per day is 200 billion dollars from stock. The bigger volume of Forex market trading actually enhances the advantages for the traders. The trading of the traders is easily executed, and people have easy access to the market. As the volume is large, you can get your desired results.
Forex trading market is a 24 hours market, and it is an over the counter market, and the transaction is not done traditionally. The interbank market actually facilitates the trading of the Forex market. The trading of the Forex can be done all over the world, and you can have trading durations for the entire day. There are multiple business centres, and there are trading timings differing across the world. So, you can trade at any point in time based on your choices. You can trade virtually through Forex, and there are 24 hours a day, 5 days a week working hours. The timing of the stock market depends on different variables and is not a 24 hours market. There are specific trading hours for the stock markets.
Liquidity is actually the ease with which you can buy or sell assets in the market. If the volume of the trade is higher, then the liquidity of the market is higher. If we consider the Forex trading market, then the trading market’s volume is big enough to allow more flow of money. With high volumes comes high liquidity. Liquidity corresponds to having spreads tighter, and there will be much fewer transaction costs which are comparatively better as compared to the stock market. This is one of the major reasons you should prefer Forex over the Stock market.
Narrow focus vs wide focus
The focus is a very important criterion as well. The Forex trading market has a wide range of options, but the trading majorly consists of eight major currency pairs. But in the Stock market, the number is in thousands. You will have greater diversity in the Stock market, and there are only a few in the Forex trading market. But there is another major factor, if you are willing to keep a close eye on the entire marketing strategies, then understanding the Forex Market is much easier. In Forex trading, you have eight economics to look upon, but you have to figure out a large variety to determine the market structure in Stocks.
Minimal or no commission
If you are willing to use a broker, there are multiple options available for stock and forex markets. Most of the brokers who facilitate forex trade have the least or no commission at all, making the margin on the spreads. Spread is the difference between the buy and sell pricing. If you trade stocks, you have to pay spreads and commission to a broker. The transparency of the forex trade is quite transparent and is easier as compared to the stock market.
The volatility of the Forex market lies in the ease of its trading procedures. The Forex market is huge, and you can easily trade in forex. Thus there are huge market fluctuations that can make huge profits at certain points in time. The change in pricing is very frequent, and hence the market is very much profitable. On the other hand, the stock market is much more stable and has patterns that can be tracked easily. Thus, you have to use the volatility factor as the key to success in the trading market. If you have a very stable market, then making huge profits is less likely.
What should you trade for stock or forex?
This is a very confusing question to answer. There are various points that would determine which one you should choose. There are advantages and disadvantages of both the markets and you have to assess what is the thing you want. The trading styles, financial expectations, goals, profits etc. should be considered while you start trading Stock of Forex. If your interest majorly lies in a fast-paced market, you have to look into the Forex trading market, whereas if you are interested in a stable and slower market, then opt for the stock market. Day traders should be more focused on forex trading.
Take a look into your requirements and decide the one which is best for you. You are the best judge. If you are willing to take up a little risk, then go for Forex; otherwise, opt for the Stock market. If you want to start by investing less, then Forex is obviously the best option. For people on a low budget or the newbie, Forex trade provides excellent facilities. You obviously should opt for a broker because trading through a broker will help you get the best results, and you will be making a profit that would contribute greatly to your development in the trading field.
So there lies a lot of difference between stock and forex, but both are quite booming markets. The marketing strategies are quite different, but it entirely depends on what you want. If you love to trade in a foreign exchange market, then go for Forex or be more willing to rely on the traditional stock market on which people have relied for ages, then go for the Stock Market. Whatever you choose, be wise in your strategies and invest as much as you can afford to gain better profits. Happy trading!