The forex market and the stock market make up two of the most popular financial markets to trade in. This is due to their volatility and liquidity, and the educational resources that are available to traders. Most people think forex and the stock market are the same. But, it is a very big mistake. That is because those two markets are completely different from each other. Now, if you don’t know the differences and want to educate yourself about those differences, then you should read this article.
Difference Between Forex and Stock Market
Forex and the stock market are totally different from each other, and those differences are as follows:
The forex market has a very great advantage here. That is because the forex market is open 24 hours and five days a week. That is because of the overlap of the time zone. Whatever, but the point is you can trade here 24 hours without thinking about the time limit and trade as much as you like without worrying about the time.
Apart from the forex market, the stock market is completely different and has a fixed timetable for trading. The time can differ from region to region. But, you have to trade according to the timetable and fixed hours.
The total volume of forex is quite good, and it offers more than 330 currency pairs to the traders so that they can trade and make a profit. However, forex offers major and stable currency pairs like EUR/USD and others, along with minor and exotic currency pairs as well.
On the other hand, the stock market volume is extremely low, and a trader will find endless possibilities and opportunities for trading. But, it doesn’t come close to forex when it comes to daily trade volume, which would be $5 billion per day. Apart from that, a trader can invest in many stocks like pharmaceuticals, automobiles, and other industries as well.
Forex market offers much lower margin rates that would be 3.3% and the leverage of 20:1. On the other hand, the stock market offers 20% of margin rates and leverage of 5:1.
Both the forex and the stock market are completely different, and the traders use different strategies to make a profit in these markets. Now, it is a fact that traders invest in these markets for profit. But, forex trading is done for short-term profit; for example, day trading is done for a quick profit. So, the strategy that traders use is different. However, traders invest in the stock market for a long-term period. So, the strategy is also different from forex trading.
When it comes to liquidity, the forex market wins the race. That is because all the currencies in the world are highly liquid. At the same time, the price of the currency can fluctuate, but it won’t be affected by the supply and demand like the stock market does. Now, let’s suppose you buy a huge number of shares from a company that will affect that company in a great way; it doesn’t matter if it is a small company or a big one.
These are the major difference between forex and the stock market that one should know about. But, I must say the forex market is highly preferable.