We knew that sooner or later someone would ask this question. So, let’s cut to the chase. There are some very obvious and not so obvious differences between trading Forex and trading stocks. Probably the biggest difference is how much easier Forex is to follow. Well, that and a whole list of other differences make Forex a sensible choice when you compare the two. Let’s look at that a little closer:
1 – The Numbers Game
There are about 6,000 different stocks listed between the New York Stock Exchange and NASDAQ. In the Forex world of trading currencies there are only dozens that are traded and the majority of the action revolves around four major currency pairs. So, here’s your question:
Would you have an easier time of following, trading, recording trends, prices and all other trading data on 6,000 items or just four? That’s a really simplified look at the difference but it is still factual. There are far too many stocks to concentrate any kind of effort on when currency trading contain less entities to work with.
2 – The Time Game
Another real difference between stocks and Forex is the time in which the markets are open. In the stock exchange there is a Monday to Friday schedule. Stat holidays also play a role in scheduling. With Forex, markets open and close around the clock in different parts of the world. With overlapping market activity you can trade any time of the day or night as a market somewhere on the planet will be open.
3 – The Time Game (Part 2)
With Forex trading your trades are instantly executed. That is under regular market conditions. In other words, fast trades, no waiting, instant activity. With the stock market there’s a lot of complication leading to a trade and it slows the process down so much that it is far from instant.
4 – The Control Game
Because Forex is not controlled in one centralized location, the element of competition comes into play. This is particularly true when brokers are vying for your trade business. Plus, the brokers will have different currency prices so if you are a good comparison shopper, Forex trading could be your next biggest move. No one controls the market and that not only levels the playing field, it creates a much larger and interesting playing field.
5 – The Influence Game
Sure, world news and economic conditions have an impact on currency rates. However, world events won’t suddenly crush the currency trading values as it can with stock values. The price of oil shoots through the roof? Expect major impacts on oil-related stocks. It doesn’t really act like that in Forex. If anything, that kind of news helps to equalize currency activity.
6 – The Foreign Exchange Game
Global markets rely on the foreign exchange as it generates billions of dollars for world banks. In Forex that’s not such a factor. Since currency pair trading does not rely on the exchange rates, it is a moot point.