If you’re new to trading, you may have run across a typical dilemma – Forex vs Stocks? Which one is more profitable? The question of Forex vs Stocks will always arise from time to time in a trader’s career. Let us look at both these forms of trading and draw comparisons to determine which one suits your trading style the best.
The Stock Market
The stock market is a collection of markets where traders buy or sell shares that are issued by various public companies. It’s a well-designed marketplace where traders can participate in various trading activities in a safe and controlled environment managed by a handful of financial authorities.
These public companies issue their shares on the stock market for the general public to buy which helps them get investors and raise significant amounts of money for their working capital. The stock market also allows these public companies the luxury of delisting or buying back their shares
The Forex Market
Forex is an abbreviation of foreign exchange, with the trading element referring to international currencies. The forex market generally revolves around eight major currency pairs involving the euro, the U.S. dollar, the yen, the British pound, the Australian dollar, the Swiss franc, the Canadian dollar, the Australian/New Zealand dollar and the South African rand.
The forex market is considered to be highly liquid where trades worth trillions take place each day due to the huge number of participants actively involved in it.
Forex vs Stocks
Opportunity: In the Forex market, you can trade 24/5 and the stock market is only open 8 hours a day and 5 days a week. If you trade Forex, this is a great advantage for you because you can hold a trade overnight in the Forex market without worrying about a huge gap in the morning, which can and does happen in the stock market.
Location: The foreign exchange is a decentralized market with no central location. It has three major periods which are called the Tokyo, London, New York, and the Sydney sessions. The stock market, on the other hand, has various markets around the world such as the London Stock Exchange, New York Stock Exchange, National Stock Exchange of India, etc.
Simplicity: When it comes to Forex vs stocks trading and simplicity, there’s no comparison. Because the eight major currency pairs account for the majority of market volume. This is compared to the more than 2,000 listings on the NYSE alone!
Margin and Leverage: A big advantage in favor of Forex vs stock trading is the superior leverage offered by Forex brokers. If you are physically trading stock, you are likely trading without the benefit of leverage. If you trade stocks using CFDs (Contracts For Difference), you can trade on margin. Usually, the best kind of leverage offered is 1:10. It is not unusual for FX brokers to offer 1:50 leverage.
Liquidity: When comparing Forex vs stocks, the volume traded in the Forex market is substantially higher than that of the stock market. Being able to get in and out of the Forex market without worry is a huge advantage over the stock market.
Minimal or no commission: Most forex brokers charge no commission, instead, they make their margin on the spread – which is the difference between the buy price and the selling price. When trading equities (stocks) or a futures contract, or a major index like the S&P 500, often traders must pay the spread along with a commission to a broker. Forex spreads are quite transparent compared to the costs of trading other contracts.
Forex or stocks? When it comes to being more profitable out of two, then the forex vs stock comparison will always favor fx trading. Forex beats the stock market hands down. Whether you decide to trade Forex or the stock market, we strongly urge you to gather your trading knowledge and skills so that you can find which is best suitable for you.
ENHANCE YOUR FOREX TRADING
- If you’re new to forex trading, download our Forex for Beginners Trading guide.
- Learn to do your own TRADING ANALYSIS in a short period of time. Check out The Complete Guide To Forex Trading.
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