Read about the main differences of trading currencies on the Forex compared to trading stocks, for a better understanding of the trading world and to see who wins in the battle between Stock vs Forex.
Over the years traders all over the world started switching from stock to Forex because of the many advantages that this market brings along. Trading the Forex is much more accessible and with the help of technology, traders can get a better image of the markets before investing their capital into any trade. Stocks on the other hand are less vulnerable to political influencers and tend to be less risky on the long run.
Before jumping into any of the exchange markets you should look at the main differences between stock vs Forex trading:
- Trading the Forex will increase your access to the market because it runs 24 hours, 5 times a week in comparison to the NYSE’s that are open only 8/5 operating hours. This brings along a whole lot of new opportunities for any trader. Specialists believe that the real competitive advantage is trading major Forex pairs during open-market overlap when volatility is high.
- In currency trading, currencies are always quoted in pairs, and each trader not only has to be concerned with the economic health of the country whose currency he is trading, but also with the economic health of the country he is trading against. A successful single trade on the Forex requires a focused analysis over two financial entities, not only one. The Forex markets are more often sensitive to emerging political and economic situations in other countries; the U.S. stock market isn’t immune but is usually less sensitive to such foreign issues.
- Simplicity is the middle name of the Forex trading business, with eight major currency pairs account for most of the market volume. While not appropriate for everyone, Forex trading allows you to focus on the fundamentals of fewer instruments rather than the NYSE’s that has over 2000 listings.
- Also, estimating the movement in the Forex trading is much easier due to the increased market liquidity over stocks. Turnover measures the intensity of assets allocation and with more volume comes more turnover.
- With huge volume at the opposite ends of the spectrum, it’s not hard to estimate the direction of each market following a similar tract. Compared to the stock market, the Forex kept developing over the past 15 years while the stock has returned to pre-2001 volume.
- Engaging into small Forex market movements can quickly generate large gains or losses. The same approach on the stock market can have relatively less impact.
For novice traders who are lost as to which industry they should trade in, it is always advisable to start with Forex trading. This is because Forex trading offers several unique benefits that may not be offered by the stock industry. Entry into Forex requires lesser investment compared to trading in stocks. Also, reputed brokers in the industry allow traders to open leveraged positions. This makes it possible for traders to magnify their gains with a small trading account.
Most advisers underline that the personality and goals of the trader are the ones who should define the direction in which one should chose to invest.
If you are interested in a gradual, long-term growth that could cover your retirement, then stocks are the best option but if you decide to hop on the active, hands-on trading experience then Forex might be the best decision for you.