Forex Vs Stocks: How To Trade

Forex Vs Stocks How To Trade

Two of the most popular markets in the world, the foreign exchange (poplarly known as forex or FX trading) and stock markets are one of the most enticing markets on the planet because of the high income possibility. It is possible to gain a lot of money in a small period of time and this attracts investors towards it. But traders must understand that to invest in either market without proper training and research is more or less like gambling, albeit legal and far more risky. Here luck can get you only so far. So it is of utmost importance what the trader is investing in, especially if the traders are newcomers.

Focus of The Trader

Focus of The Trader

Perhaps one of the most key differences in forex and stock trading is the focus of the trader in question. The trader can either focus on individual shares and make profits off of the limited number of variables they are offered thus; or they can focus on a much wider trend and make much more money. The former is usually associated with stock and the latter with forex. Narrow matrices are of great importance in stock and a few of them are cash flows, debt levels and earnings guidance. Forex on the other hand is much wider. The implications of this is that the traders willing to trade on forex need to know more about the Gross Domestic Product (GDP), inflation and unemployment rates of the country whose currency they are trading in because unlike stock, the currency rate of a country signifies where it stands in the world economically. So while stock traders need to be well versed in microeconomics, forex traders will have to deal with macroeconomics.

Trading Times

If the trader is looking to use their invested money to make a quick buck and use the money as a means of supplementary income then forex is definitely the way to go. This is because as a part time investor, the trader may have a day job that makes it difficult for them to focus on the trade. But if the person is willing to invest in forex, with a 24 hour trade availability 5 days a week, it is very useful for the trader to make money, because they can do it at a time other than work.

Liquidity

Liquidity

Forex is the most liquid market on the planet. Although blue chip stocks such as those from Microsoft, Apple, Amazon etc. can have comparable liquidity to forex, once you move to normal stock, it can get much less liquid. If there is greater liquidity, there is tighter spread and with tighter spread comes lesser transaction cost. The lesser transaction cost coupled with zero commission on the part of forex makes it much more attractive to a person who wants a rapid profit in a short period of time.

Leave a Reply

Your email address will not be published. Required fields are marked *