June 8, 2021

Forex Trading VS. Stock Trading

What is Forex Trading?

Forex Trading also known as Foreign Exchange, is the process of buying and selling of currencies in the global market, mainly one currency for another and they are always traded in pairs.

What is Stock Trading?

Stock Trading is the process of buying and selling shares of publicly held companies in the stock market.

What Is the Difference Between Forex VS. Stock Trading?

The main difference between forex and stock trading is what you are trading. As mentioned above, forex trading is when you trade currencies, and stock trading is when you trade stocks or public shares of companies.

The two are vastly different, and once you get your answers to what is forex trading, and what is stock trading, and what is forex vs. stock trading, then you can decide which is trading market is best for you.

In addition, market hours, market prices, and more are all other ways that the forex vs stock market is different, and, in the end, deciding which one to trade comes down to which trading style best fits you.

Market Hours

In Forex Trading, the market is open twenty-four hours a day and five days a week, compared to the stock market which is open during normal “business hours” Monday through Friday, although some time has been extended during pre and post-market hours.

What is beneficial about the forex trading market is that you have a major availability to trade whenever you want at all hours. On the other hand, having the market open at all hours means there will be many times the market will be moving when you cannot be around to trade.

Hence, the best possible time to trade forex can be when the market is most active, which is usually when two markets overlap, as there will be a higher number of buyers and sellers. For instance, if you were interested in the London and New York market, their trading hours overlap between 12 pm to 4 pm (London time). This can cause market liquidity and speed up the transactions, possibly making you more profit.

Market Influences

When it comes to market prices, besides supply and demand, there are other factors that can interfere with the market value of what you are trading. When it comes to the stock market, a company can greatly influence the value of its stock. For example, the company’s debt, earnings, and profits can affect their public value.

In forex trading, what can influence the market is more global in terms of a country’s situation versus a company. For instance, unemployment, inflation, and the gross domestic product or GDP. Also, political events and world news can influence the forex trading market as well.

Volume

A key difference between forex vs. stock trading is the market’s volume size. In the forex market, there is an estimate of around five trillion dollars a day in the market. With the biggest volumes in the European and American markets, American and Japanese markets, London and American Markets, and Australian and American markets.

Compared to the forex market, the stock market’s volume is closer to two hundred billion dollars per day. Although still a lot of money, it is nothing compared to the forex market.

Currencies VS. Stocks

As mentioned above, the forex market deals with trading currencies and the stock market with a company’s stocks. When it comes to the forex market, there are mainly eight economies to concentrate on versus many, many stocks, thus, making it a little easier to focus on fewer trades and trends, possibly, at a time with forex trading.

Which Market Is Best For you, Forex vs. Stock Trading?

Now that you know what forex trading is and what is stock trading, you can decide which trading is best and can be most profitable for you. Again, it all depends on your trading style and what you and your pocket are most comfortable with.

Generally speaking, it is said, stock trading can be best for traders that prefer to buy and hold their stocks, although there are many stock traders that day trade and buy and sell their stocks all on the same day, it is also said that the forex market can be more fast-paced and full of action for multiple trades in the day as well but in reality, it can really depend on the market that specific day and as you read earlier, the things that influence that particular market.

Other Trading Markets

Besides the stock market and the forex market, there is also an ETF market, Options market, and Contract for Difference market. Although this article was written to explain the main differences between what is the forex market is and what is the stock market, it is a good idea to have a general view of the other trading markets available too. In review, the stock market is when you buy and sell shares of a company, and the forex market is when you trade one global currency for another.

In addition, the ETF market is similar to the stock market where you can buy and sell fast or hold for long term. In the ETF market, you are trading different industries, currencies, and commodities.

Also, the options market in which you make an agreement with someone for a potential transaction on a security at a told price and as well, the contract for differences which is a contract that pays the differences in the settlement price between the open and closing trades and where you receive no actual goods or securities. This market is not allowed in the United States.

Instead, in the United States, you can trade in the futures market which is very similar to the contracts market, but it’s a market in which you make an agreement to buy or sell a specific quantity of a commodity at a specific price on a certain date but in the future, and actually trade a physical security or commodity.