When it comes to trading, there are two major markets, forex and stock. These are the markets you are the most likely to come across everywhere. Both are major driving forces behind many economies. They appear the same for the outside, but there are definitely major distinctions. Here, we would like to explore these differences and choose the best ones for you.
If you want to compare stock and forex trading, you have to consider what your interests are. What would you suit? After you figure that out, we will be able to find out which one you should use. They are both perfectly valid forms of trading, is the main point.
The first different we can point to is the size of the markets. Forex markets are far larger. There are over $5 trillion worth of trades every day here. Compare that to the stock market, at $200 billion. It is obviously much smaller. The reason is the forex market is more accessible and trades a rather obvious assets, currencies.
Then we should look at liquidity. Liquidity in markets is the ability to transfer your earnings into cash as quickly as possible. Forex markets, dealing almost exclusively in money, are almost by definition liquid. The associated brokerage costs are also low. By comparison, stock markets are only somewhat liquid. Convincing someone to buy your stock can be a little harder.
There is a vital difference in strategies between the two. Forex trading is far more fast-paced and suitable for day trading. There is a lot more uncertainty, so holding a currency is riskier. Stock trading is different in that a long term strategy is more important. As long as the fundamental strategy of a company is sound, growth should occur.
The variety in the stock market is far greater. You can support all sorts of companies that have a variety of interests. In forex, you are only dealing with currency pairs.
So, there are the differences. Forex is more accessible, but more fast-paced and uncertain. Stocks take longer to get into, but you get a wider range of options in the end, and gives you time to think.