What to Opt?
Forex and the stock market are two of the most popular financial markets in the trading world. That being said, both trading markets have a large historical volume, volatility, and several educational resources. The only difference between the two markets is the elements that are traded, so how do you determine which one is best for you?
Determining which asset you want to trade requires contemplation. Choosing the best fit depends on the trader’s personality, aptitude, interest, and of course experience. This blog entails the significance of both the trading markets, their differences, and their similarities so you can choose your best fit.
Trading Hours
The trading hours of both markets differ. The stock market has always had specific trading hours, unlike the forex market which is open 24 hours a day and five days a week. It remains open because of the different time zones that are dealt with in the forex trade.
Trading in the stock market takes place during the day and each stock market is open according to its time zone. Some stock market exchanges also practice taking a lunch break, e.g., in the Asian-Pacific region. Both the forex and stock market, however, remain close during the weekend.
Hence, the forex market timings are comparatively flexible. This specificity in timings can be bothersome for some traders while it can be convenient for others.
Asset Volume
A prime appeal of the forex market is the volume of assets available for trading. On the platform of Global Trade Capital (GTC), clients can have to access to more than 70 currency pairs, where most currency pairs are major, while others are minor. Many traders show an inclination towards major currency pairs, due to stability. Commonly traded currency pairs include EUR/USD and GBP/USD.
On the other hand, the stock market provides traders with an endless array of options. GTC also has several international stock options available for its clientele. These stock options include shares of companies from Russia, China, the US, and Europe.
Despite the several stock options, the daily volume of the Stock market does not measure up to that of the forex exchange. Forex exchange trading constitutes a daily volume of $6.6 trillion.
Liquidity and Volatility
Market volatility means the speed at which the market price changes. High volatility signifies better potential to make money, which is accompanied by higher risk. Minimizing risk during high volatility is tricky and requires discipline. Traders who are good at decision-making and risk management end up making higher profits during a volatile market in shorter periods of time.
Liquidity refers to how quickly an asset can be bought or sold on the market. What most forex traders seek is high liquidity. Traders looking for high liquidity prefer volatile markets where they can easily sell their assets and gain a quick buck. Short-term traders hence prefer high liquidity and high volatility. A forex market entices short-term traders allowing them to sell within a short period of time.
In comparison, the stock market is usually preferred by traders looking for a long-term investment option. Stock traders have a buy-and-hold mindset. Traders who are not comfortable in a market with high volatility prefer stock options. Stock exchange traders show an inclination to open positions with a potential for profit in the long term.
Leverage rates
Leveraging is also known as margin trading, which constitutes borrowing money from your brokerage to trade assets. Some consider trading on leverage to be risky. However, it does have its benefits. Trading on leverage provides traders with wider exposure.
Leverage is commonly known as the benefit of trading with currencies. GTC provides customers with a 1:500 leverage to trade with almost 80 currency pairs. For stock options in GTC, clients can avail leverage of up to 1:70.
The leverage that traders can avail themselves of depends on the market they are trading in. Both markets have risk factors that determine leverage. Traders who have an appetite for wider exposure often opt for the forex market. As mentioned, despite the advantages, leverage is a double-edged sword and can be a risky affair.
Trading Strategies
Different trading strategies help traders succeed in different markets. Strategies are created according to one’s aptitude and appetite. When traders are inclined towards taking a long position stock options are preferable. However now CFDs provide traders with the ability to take a long and or short position, according to your preference.
Forex traders can easily profit on short positions making profits with even the slightest price movement in the market.
Which Trade Is More Profitable?
Then again the market profitability depends on how long you can manage to hold on to your assets. It is the strategy that makes your trade profitable, not the kind of trade you chose. Several people earn big profits on stock markets while some earn on the forex market. This particularly depends on how you plan to play with your investments.
Succeeding in trade however depends on your skill, knowledge of the market, and experience. Experiences can only be gained through risk. However, GTC provides its amateur investors with an option called social trading where clients can imitate professional traders from all around the world to garner not just experience but profits.
How Are Both Trades Similar?
Future prices are usually predicted by traders after determining similarities among financial markets. Both markets sometimes show a correlation between various stock market indices and subsequent exchange rates. Hence studying currency prices sometimes helps traders determine future stock market movements. However since the forex market is comparatively more volatile, sometimes these sudden fluctuations fail to indicate which direction the stock markets are heading.
Final thought
The choice of the market is purely dependent on what you prefer. If as a trader you have the patience to buy and hold, the stock is a good option. However, if you prefer making quick bucks in short time periods, Forex is a better option. But remember success in trading is not guaranteed as economic and political situations strongly impact all trades.
