Are you confused about trading between Forex and stocks? You want to choose a market for trading. Then let’s discuss these markets.
Forex is short for Foreign Exchange. It is the world’s largest market, which trades daily for $6 trillion in business. The Forex market works on the conversion of one currency into another.
On the other hand, the stock is a market that gives shares of a company so traders can buy or sell their shares. Stocks are a smaller market as compared to Forex. Its daily business is more than $200 billion a day. The stock is available in different parts of the world, such as on the New York exchange.
Forex versus stocks?
There are a few factors to consider when deciding whether to trade Forex or stocks. So let’s discuss the elements and find a difference between Forex and stocks.
Market trading hours
Forex is a global market accessible from any part of the world. A forex trading sessions is available 24 hours, open five days a week. So this is the best market for day traders. Such as, if the opening hours of Forex are closed in London, then it will be accessible in Sydney. The time zone of trading also overlaps in different countries. So, Forex is considered a highly active market. The London time zone and the New York time zone of the Forex market overlap.
The stock market is not available 24 hours a day. There are some companies in which traders can trade stocks during the stock market’s limited hours. The trading hours of the stock market are 8 hours a day. You can trade EUR/USD currency pairs all day in Forex, but you can’t trade Apple stocks all day.
If you look at trading volume, then Forex trades for $6 trillion in a day, and stocks trade for $200 billion. There is no competition in terms of volume between these two markets. With a large volume, Forex can execute many trades on the stock.
The market will have high volume and will also have high liquidity. But if liquidity is high, the spread will also be increased. But the spread of Forex is low as compared to the stock market.
Forex offers to trade with high liquidity because it is open 24 hours a day. But the stock market does not provide the same liquidity as that of Forex. Stock market liquidity varies widely amongst individual stocks—a stock with low liquidity cannot be purchased and sold as readily as a stock with high volume.
Beginners face the issue of trading on Forex vs stock. Both markets have advantages and disadvantages, but the trader should look at these factors and decide which market is better.
Forex provides trading facilities to both short-term and long-term traders. Both traders can take advantage of the Forex market. On the other hand, stock offer facilities are for long-term traders only. So it is up to the trader to select the market that best suits their needs.