The differences between stock trading and forex trading

There are many misconceptions about financial investments. Investing in the stock market (stocks) is a good way to leverage your savings, but there are other less complicated and less demanding ways to speculate, such as Forex trading (via traditional forex brokers or regulated binary options brokers) which is just as much. profitable. Forex trading has advantages over stock market investing that make traders opt for the former, currency and stock markets have some differences, please find the main ones below.

The number of trading instruments (assets)

In forex trading, you don’t need to monitor thousands of stocks, the New York Stock Exchange has nearly 4,500 stocks available for trading and the NASDAQ another 3,500 stocks, for a total of 8,000 stocks, most of which can be found on online brokers. In forex trading you can only focus on major currency pairs with low spreads, we have ten of them (EUR / USD, GBP / USD, USD / CHF, USD / JPY, USD / CAD, AUD / USD, EUR / GBP, EUR / CHF, EUR / JPY, NZD / USD), even the thirty additional currency pairs that are usually found among brokers can be interesting to study, not to mention some of the exotic currency pairs available.

Market Order Execution

Unlike the stock market, there is no discrepancy between the price displayed on the trading platform and the execution price in the Forex market. Outside of “normal” trading conditions, a slight “slippage” may be observed, for example during major economic announcements such as Non Farm Payroll (the most important economic announcement in forex trading). What you see displayed on your forex trading platform is the price you get running as there is price certainty in the forex market and the trading is done in real time.

Trade restrictions

In some markets, such as the stock market, certain trade restrictions are imposed, such as short selling. Such strict measures are not present at all in the Forex market which operates on the basis of a two-way process; when we buy a currency pair, we buy the base currency (BASE / XXX) and we also sell the counter currency (XXX / CTPT) and vice versa when a currency pair is sold.

Market sensitivity

In the Forex market, traders can benefit from the immediate effect of a major figure in the economic calendar, a sudden major news, a central change in the bank interest rate. This spontaneity in the Forex market causes significant price fluctuations and creates many daily investment opportunities that can be exploited. On the stock market, sensitivity is lower, it is necessary to wait until a particular economic event (such as the publication of quarterly sales figures or the announcement of a company’s IPO) affects a share of a particular company for the effect to be felt on the prices, note that this type of economic event occurs quite rarely on the stock market and limits short-term trading opportunities.

Access to investments

Unlike stock trading brokers, with regulated forex brokers and binary options brokers it is not necessary to have a capital of several thousand euros to start speculating, generally this type of broker is accessible for only one hundred euros. To invest in Forex, know that the minimum deposit is enough!

People who want to invest their money must be aware of the needs of the stock market, in forex trading or binary options trading it is possible to speculate on stocks but in a simplified way, that’s why this form of investment is recommended for beginners. Forex is a viable solution and an alternative to the stock market, so what are you waiting for to get started ?! 😉

Leave a Comment