Is forex better than stocks? Find out key differences
You’ll hear a lot about forex versus stock trading because they’re the two most popular global markets.
While forex and stocks are similar, they are not identical, and one may suit your trading style more than the other. For example, you could start trading in both the FX and stock markets.
So let’s find out if forex is better than stock markets.
What’s the difference between forex and stock?
Here are some of the key differences between the two markets:
Market hours
The currency markets are more accessible than the stock markets. Traders can trade equities nearly 24 hours a day, Monday through Friday, but accessing all markets is difficult.
Forex trading is considerably easier to perform 24 hours a day, seven days a week.
5 There are numerous forex trading organizations worldwide, and trading time is always in one of the time zones.
Most retail stock investors trade through a US broker during a single major trading session, which runs from 9:30 AM to 4:00 PM EST.
Volume
The forex market is the world’s largest and most liquid financial market, with hundreds of currency pairs to choose from, attracting day traders, scalpers, and swing traders seeking quick profits.
On the other hand, stocks provide a far wider range of trading options, ranging from penny stocks to the world’s largest corporations, such as Apple Inc., with a market cap of $2.8 trillion.
On the other hand, stocks have less liquidity and may take longer to earn a profit.
Liquidity
You buy shares of firms that cost anything from a few dollars to hundreds of dollars when you trade stocks. The market price is affected by supply and demand. The currency market is a completely different planet.
Even though a country’s money supply fluctuates, there is always a huge currency to trade.
Because all major world currencies are highly liquid, the price sensitivity of the two markets to trade activity is vastly different. The buying of 10,000 shares of stock may impact the stock price.
Is forex better than stocks?
Well, that depends on whether you are a risk-taker or a risk avoidant – what type of trader you are.
Do you wish to trade the EUR/USD or other currency pairs, or would you rather buy and sell blue-chip stocks like Amazon – which saw its market value climb by $190 billion in a single day (really, $190 billion!) – or engage in direct options?
Short-term traders with a larger appetite for risk and less capital prefer forex trading since they can swiftly enter and exit a trade at a chosen price level due to the availability of market players.
Equities are generally a better alternative for those looking for more consistency over a longer period.
Bottom line
Forex trading may be for you if you are risk-averse, a short-term trader, or have a limited amount of money, to begin with. However, stocks are generally a better choice if you want to buy, hold, and invest for the long term.
« A complete guide on Forex EA How Much Do You Need to Start Day Trading in Forex? »
