Forex vs stocks: an overview

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asked Aug 19, 2022 in 3D Segmentation by freeamfva (39,060 points)

Forex vs stocks: an overview

The foreign exchange market is the largest and most liquid financial market in the world, with a seemingly endless amount of major, minor and exotic currency pairs to trade. Forex traders can use pips to monitor price movements in forex trading in order to determine if the market is moving up or down. The most popular major currency pairs​​ for forex trading include EUR/USD, GBP/USD and USD/JPY, among many others.To get more news about Forex vs. Stock, you can visit wikifx.com official website.

Stock market trading allows traders to speculate on the value of blue-chip stocks​ and penny stocks, which are both popular assets with an opposite original value. Some of the most promising shares to trade are well-established companies with a large market capitalisation, such as Microsoft, Apple and Amazon. If you are willing to take a risk on a speculative investment, then penny stocks​ can pay off in the long term if successful.
Market trading hours
Trading hours differ between the forex market and the stock market. The forex market is open 24 hours a day, 5 days a week, due to the overlap between time zones. This is one of the advantages of forex trading over stocks. On the other hand, there is a set daily timetable for stock market trading hours​​, depending on the specific region and exchange.
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For example, the London Stock Exchange (LSE) is open between 08.00-16.30, whereas the central forex market operates between 08.00-16.00, while being overlapped by both New York and Tokyo sessions. Certain exchanges also close for a lunch break, in particular, within the Asia-Pacific region. Therefore, you could say that forex trading hours​​ are much more flexible than those of the stock market and there is definitely more time to spend trading forex. However, neither of these financial markets operate over the weekend.

Volume of assets
A particular appeal of forex trading is the volume of assets available to trade. We offer forex trading on more than 330 currency pairs, including major, minor and exotic forex pairs, which is the highest figure in the current market (see our forex trading​ page for more details). Forex traders tend to lean toward major currencies such as EUR/USD and GBP/USD, as these considered to be generally stable within the forex market.

The stock market opportunities are endless, however, it does not come close to forex trade volume of around $5 billion per day. You can trade on thousands of global shares within the technology, pharmaceutical and automobile industries. This includes both blue-chip stocks and penny stocks. Some of the most distinguished global indices are traded on the stock market, such as the Dow Jones Index and S&P 500.

However, the number of shares on the stock market is not always seen as an advantage over forex trading. Some traders prefer the reliability of trading a small number of top forex pairs that have remained in the market consistently, rather than deciding between existing, new and emerging possible stocks to invest in.

A popular method of trading stocks over forex is through ETF trading​. Exchange-traded funds are investment funds that hold a collection of underlying assets and work in a similar way to shares. This gives the trader partial ownership of the underlying stock, whereas spread bets and CFDs do not provide any ownership to the trader. Given that stock traders often prefer to open long-term positions within the stock market, ETFs are a useful product for this purpose*.
Volatility and liquidity
A popular topic for the forex vs stocks debate refers to market volatility. This measures price fluctuations within the markets that can either help traders to gain profits if the trade is executed effectively, or losses if the trade is not successful. Forex traders in particular often look for high liquidity within the market, as this means that an asset can be bought and sold rapidly without having much of an effect on its price. Therefore, it is likely that high market volatility is more beneficial for short-term traders. Many forex strategies work to open and close positions in a short period of time, with the intention of making a profit from small price movements when the market is particularly volatile. This way, they can enter and exit trades with quick precision.

In contrast, long-term traders that prefer a buy-and-hold method may be less comfortable in a volatile environment. This relates especially to stock traders. Given that certain blue-chip stocks are known for their stability within the stock market, traders are more likely to open positions with a potential for profit in the long-term. Therefore, as they are not looking for short-term price fluctuations, a volatile market would not work for their trading strategy. Learn more about volatility trading​​.

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