Would You Rather Do Stock Trades Or Forex Trades?
Stock trades and forex trades provide you with great opportunities to invest your money in. Perhaps that is the most important similarity there is between them. However, there are numerous differences that will make one of them appear more attractive to an investor depending on his or her financial interests, goals and objectives. Due to the current advancements in technology, the perceived complexity of these trading options has been largely demystified and now even novices can quickly learn and start trading online. The stock markets and forex markets world over have attracted many investors and trades worth billions to trillions of money are done daily.
Differences Between Stock Trading And Forex Trading
We can outline the major differences between stock trading and forex trading along the following lines:
1. Trading Hours Convenience
Although different stock trading and forex trading market around the world operate at different hours, there is more flexibility with forex trades being done 24 hrs and in most cases the stock trades being done within 7 hours a day. This is an important consideration for an invest to choose where to put his money depending on his or her availability to trade and the expectations of financial returns. The reason why stock trades may not be possible 24 hours a day is because different companies are listed in different stock exchanges and your stock broker may not be a member to all of them. In any case, only the big international companies would have their stocks traded in different stock exchanges. All forex markets would have more or less the same currencies from countries around the world. When one forex market closes, another one has just opened and the cycle continues from Monday morning to Friday evening.
2. Short Term Or Long Term Trading?
Stocks trading was traditionally viewed as suitable for long term trading but now the internet has made short term investing in stocks possible. The stock market can therefore accommodate many types of trading from scalping, day trading, swing trading, position trading to the long term buying and holding investing. However, the forex marketing is strictly suitable for short term investing. Traders enter in deals and exit within a period of 24 hours, in most cases only within minutes.
3. Brokerage Commission Fees
To invest in stocks of a company listed in a certain stock exchange, you have to do it through a stock broker who is a member and invests directly there on your behalf and all other clients they manage. These discount stock brokers do charge small commissions which tend to significantly affect most profits for day trader. Forex trading does not attract commission fees especially through banks which are criticized by most foreign exchange brokers for their spread, that is, the difference between interbank rates and selling rates. However, you can do many forex trades in a single day without accumulating much brokerage fees.
4. Transactions Volumes And Value Per Day
The forex market is virtual and due to difference in times zones and the fact that people from different parts of the world are not limited by any factor, trading goes on non-stop from Monday morning (Australia) to Friday afternoon (New York). That translates to trillions worth of forex trading transactions compared to billions that stock exchanges combined manage. That may suggest that you stand to gain more investing in forex than in stocks, though other prevailing circumstances should be taken into consideration.
5.Liquidity
The large volumes and high value of forex transactions on daily basis are good indicators of the liquidity in the forex market. There is less convenience in converting one currency into another while that can happen any time a trader chooses within 24 hours. When trading stocks, you may be forced to wait until the stock exchange where the company whose shares you want to sell opens. The stock exchanges are often limited to 7 hours of trading operations in a day..
The comparison of stock trading and forex trading should open up your eyes as an investor to know which can work better for you depending on your financial goals and objectives. Each has its own strengths and weaknesses as far as the opportunities and risks are concerned. It is important to note that you need information to trade in either stock markets or forex markets because you can either gain or loose. You need to be able to use news, signals and economic trends analysis to stand better chances of making profits. Many brokers will provide various tools and resources to make you good in trading online.
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