Why Trade Forex: Forex vs Stock Market

Forex vs Stocks. Google vs Yahoo. Lambo vs Chrysler. 

Ultimately, the answers all come down to the features that are important to you. 

Stock market trading and Forex Trading are both viable paths to financial success, but before you start trading Forex or you trade Stocks, it is important to find out which is best suited for your trading strategy, your trading style, and risk appetite. Deciding which of these financial markets to trade does not have to be complicated, and many factors can be considered in order to make the best choice. 

Take a look at our comparison – Forex vs stocks – and explore the key differences between forex trading and stock trading.

Comparison: Forex vs Stock Market

Below, you can find five main factors that will help determine which market is best for you – the foreign exchange market or the stock market. 

forex-vs-stocks, forex trading

1. Liquidity

The Foreign Exchange market is the most liquid market in the world with an average daily trading volume exceeding $6 trillion. The Forex market can absorb trading volume and transaction sizes that dwarf the capacity of any other market. This high liquidity essentially means you’ll get market execution when trading forex and you’ll never get into a situation where you won’t find a buyer or a seller.

Let’s use the stock market for comparison.

All the world’s combined stock markets don’t even come close to the daily trading volume in the Forex markets. The largest stock market, New York Stock Exchange, (only) trades an average daily volume of $22.4 billion.

Peanuts!

I don’t know about you but I would rather get a piece of the $5 trillion!

2. Market Trading Hours

The Forex market never sleeps! The FX market is open 24 hours a day and 5 days a week, only closing down during the weekend. 

This is convenient for those who don’t want to quit their full-time job and dedicate their life to trading because you can choose when you want to trade: morning, night, during breakfast, or whilst waiting on your girlfriend to come home from her 3rd ‘business trip’ this week.

The stock market, on the other hand, is limited to an exchange’s opening hours. For example, in the U.S., most stock exchanges open at 9:30 am EST and close at 4:00 pm EST.

3. Simplicity

There are approximately 2,800+ stocks listed on the New York Stock exchange. Another 3,300+ are listed on the NASDAQ.

Which one will you pick? Have you got the time to stay on top of so many companies?

And yes, you may argue that with the currency market – there are hundreds of currencies traded so you’ll be able to find lots of trading opportunities, though the majority of active traders trade the seven major currencies.

And 7 major pairs are much easier to keep an eye on than thousands of shares, don’t you think? (Especially when you have the HowToTrade free courses by your side every step of the way).

4. Capital Required

Getting started as a Forex trader doesn’t necessarily cost a ton of money, especially if compared to trading stocks or futures.

When trading CFDs, online Forex brokers offer ‘mini’ and ‘micro’ trading accounts, some with a minimum account deposit of just $25. Also, forex brokers offer leverage trading up to 500:1 in some cases, so you’ll be able to use low initial investment and take advantage of small market movements.

Now, we are NOT saying you should open an account with the bare minimum, but it does make Forex trading much more accessible to the individuals who want to test the waters before diving in too deep!

5. Free Demo Account

Most online Forex brokers offer free demo accounts to practice trading before risking your hard-earned money. Free demo accounts are valuable resources for all beginner Forex traders that want to sharpen up their trading skills, develop trading strategies, and processes with pretend money and ZERO risk.

Again, this is something stock traders can envy as demo accounts are unheard of in the stock market.

The Bottom Line – Stock Market Trading or Forex Trading?

To sum up, both forex and stock markets are great markets for beginner traders to start their trading journey. These popular global markets provide higher trading volume than other markets and the ability to make money from future price movements.

Still, like all things in life, you must learn to crawl before you can walk. And Forex or stock trading is no different.

forex vs stocks

Now, we may be biased but the Forex vs Stocks Scorecard isn’t… If you ask me, Forex and currency trading seems unbeatable!