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4 Major Differences Between Forex & Stock Markets

Updated: Dec 21, 2022

One of the most intriguing questions most neophyte traders keep asking can be, "what is the difference between Forex & Stock trading?
The internet and technology paved the way for anyone to trade and even become a professional trader with one click! Every day,millions of online trading transactions take place from all over the globe. These transactions take many forms.

To answer that question read this brief guide on the main difference between Forex & Stock trading.


Most traders prefer Forex trading to stock trading because of the enhanced leverage capabilities that the Forex (Foreign Currencies) market allows. In contrast, others are fascinated with the safety of stock markets. If you are about to test the waters of one of these two markets, read on to know the main differences between Forex and Stock trading.

Liquidity

Trading stocks, one will buy shares from companies that might be worth hundreds of dollars or millions of dollars. Of course, market prices vary from one place to another according to supply and demand. Trading on Fx is a different story!


While the supply of a specific currency may be volatile, there is always a large amount of money to trade. When a trader purchases 10,000 shares, that would highly impact the stock market, yet if anyone buys like a hundred million dollars in one of the major currencies, it won't affect the Forex market!


On the other hand, you can trade with a margin account of 2:1 leverage in stock trading. If a day trader who opens and closes their positions on the same day can maintain an account balance of 25,000 $, they can trade with a 4 :1 leverage. Still, there are some qualifying prerequisites for that. Forex trading is different because there is no qualifying prerequisite to trade with leverage. All you need is to open a Forex Trading Account!


Trade pairing

In Forex trading, currencies are always paired. Moreover,the trader should take all economic factors of both countries holding the pair of currencies. Factors like the country's GDP, economic growth, political stability etc., are all factors that any Forex trader must study well and know all consequences when trading currencies of any pair.

This doesn't apply to stock markets unless you are buying shares offshore, so your primary concern would be whether stock prices will increase in value.


Market hours

Forex markets are accessible 24/5, yet you can't easily access all markets due to time differences. It is continually trading time in one time zone or another. Usually, Forex markets work nonstop, which can be a massive privilege for traders as they can make the most out of trading.


On the other hand, stock traders make the most of the overlapping hours of markets between 9.30 am to 4p.m EST. There are still "after-hours'' trading markets, but they usually have less liquidity, making them less popular than other markets.


Which Market should I choose?

Traders are usually aware of stock trading rather than Forex; therefore, one should learn and test the waters in each market and then decide what works well. Some traders enjoy risky deals and like to trade with a trusted and regulated online broker such as 9BULLSFX, whose team aims to enable traders to reach their financial maturity.


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