Stock Trading VS Forex Trading – 7 Key Differences – South Coast Herald

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When looking to trade in the financial markets, there are several options to choose from. Two of the most popular choices are stock trading and currency trading. Although both can be profitable ventures, there are key differences between the two.

In this article, we will take a closer look at 7 of the main differences between stock trading and forex trading. By understanding these differences, you can make an informed decision about which type of trading is right for you.

So let’s get started!

Market Trading Hours

Forex traders can participate in the forex market at any time during working hours. However, there are times when it becomes more active than others and this affects the way you trade forex.

For example, with stocks, stock markets have “session” periods where trading takes place at set times each day – between 10 a.m. and 1 p.m. on weekdays or between 6 and 9 p.m. on Saturday evenings. While the forex market hours have round-the-clock coverage, no matter what time zone one resides in, any day of the week will provide opportunities for profitable investing.

Leverage

Using forex’s high leverage makes it an attractive business for many traders, but also increases risk. Only after managing the risks is it worth trading with high leverage forex brokers. Novice traders who do not want to risk can select an option of micro forex accounts to trade with the smallest size of currency or other instruments.

In the case of the stock market, it generally has much lower leverage and is a safer market in comparison.

Liquidity

Forex has high liquidity because it is essentially infinite supply. The influence of market makers on liquidity can also be important. Shares, on the other hand, are limited by the number of existing shares and what they represent. For example, blue chip stocks will generally have more availability than penny stocks, which can sometimes mean that they are less competitively priced or do not trade as frequently due to their low market capitalization per share (which informs investors about the price).

Volatility

The foreign exchange market is less volatile than the stock market. Exchange rates for major currency pairs rarely change by more than 1% in a day, making them suitable for high leverage trading with low (or no) associated risk.

Whereas the stock market is much less stable. Individual stocks can gain upwards of 5-10% per day during strong uptrends, making them suitable for trading with low leverage or no leverage at all.

Regulation

Forex traders have to follow different rules than stock market investors because they are not regulated by US agencies. Forex trading is not subject to the same level of regulation as other financial markets like stocks and futures.

The primary purpose of these regulations is to protect retail investors from common frauds seen across international borders.

Market size

Forex trading is a global business, but it is also very local. While shares are traded internationally on a large scale with millions of people playing the market at any given time and on many exchanges around the world, there may be long waiting times before you buy or sell because everyone wants what you have. (or think they do), forex traders currently have an opportunity that never goes away: liquidity! This means that when we say ‘today’, our customers mean ‘tomorrow’, so if in some countries the market is opening up and at the other end of the world it is closing down.

Price Catalysts and Influencers

Forex and stocks are two of the many financial markets that can be affected by the news. The types of stories affecting these currencies differ, however, forex is generally moved by global issues while stock prices most often react to company-related developments or industry trends within individual economies themselves. Additionally, political events can trigger wild swings if traders believe they will have a significant short-term impact – which is not always true but certainly worth watching.

Conclusion

The article introduced you to the top 7 differences between stock trading and Forex trading. Depending on your investment goals and strategy, one type of trading may suit you better than another. If you’re still unsure what type of trading to pursue, consider talking to a broker or financial advisor for their professional advice. Ultimately, only you can decide what is best for your personal situation.

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