http://blog.epicresearch.sg/2018/06/12/forex-vs-stocks-comparison-singapore-traders-gbpusd-eurusd/
There are many different markets and instruments out there that traders can choose from. It all depends on their trading style and risk tolerance. My goal is to explain the difference between the world’s largest financial market, Forex, and well-established blue-chip companies and the stock market. There are benefits to both depending on what type of trader you are. There are a few main differences that I will be covering such as volatility, leverage, trading hours, commissions, and more.
Anyone new to trading is probably wondering what the heck to choose. There is no better one, it comes down to personal preference and what your trading style is.
The foreign exchange market is the largest market in the world accounting for more than $5 trillion in average trading volume each day. The Forex market largely consists of investment banks, central banks, hedge funds, and large companies. It is also traded 24 hours for 6 days a week. It is traded from Sunday at 5 pm through Friday at 5 pm.
The stock market mostly consists of the large blue-chip companies around the world in which you can buy shares, ownership, of. This is traded 6 and a half hours a day Monday – Friday and is closed on the weekends.
Volatility is very important to a certain type of trader. If you are looking for very volatile short-term price fluctuations then you will most likely want to trade the forex market. Blue chips in the stock market are more conservative and long-term investments.
Leverage is a huge advantage that Forex has over Stocks. A beginning trader with very little capital can enter the Forex market with $100 and get from 50:1-500:1 leverage in order to trade with little restrictions. However, in the stock market, it would be a lot harder to profit from small capital because the leverage is generally 2:1.
Trading hours are considered by many traders as well. The stock exchange is limited to 9:30 am EST to 4:00 pm EST, with the most volatility limiting you to only 9:30 am to 11:00 am and 3:00 pm to 4:00 pm. Unlike Forex, it remains active 24 hours with different markets and time zones such as the US, Tokyo, London, and Sydney. There is typically liquidity at any time of the day in the Forex market, unlike the stock market.
Trading pairs vs companies can be vastly different. In forex, you have to worry about two different companies at the same time because they are traded in pairs and against each other. In stocks when you buy shares of a company you only have to worry about that one company and its health of it, no other company or economy matters. So to be successful in Forex you need to be good at analyzing not only one economy but two at the same time.
Considering the liquidity differences, the price sensitivity makes a difference in trade activity as well. Since the forex market is so liquid and trades trillions of dollars, you can make a trade worth several hundred million and it won’t move the currency price all that much. In stocks, if you make the same trade it could move the stock significantly because it’s the liquidity of the company, not the country’s economy.
Ultimately it’s up to you to decide what suits you better. Most investors know about the stock market more and might want to trade that just because they know what is and are more familiar with it. There are benefits and downfalls to each, it just depends on what you are looking for and feel the most comfortable trading.