Forex vs. Stock Investment

Published On: July 8, 2015Categories: Highlight, Trading2.1 min read

If you want to begin your investment yet do not know what type of investments would give you the best profit then you need to know about Forex and stock investment. Many investors have their investments on both Forex and stocks. However, for a novice it is better to focus on one of them and start to plan a good strategy on it to make profit. Forex or Foreign Currency Exchange market is the world’s largest financial market where the currency trades. On the other hand, stock represents any kind of security that can signify ownership in a company. Actually, both Forex and Stock have the same chance in making money and having great risk as well.

Forex trading as mentioned beforehand is a platform where currencies of two countries are traded. The quote comes in pair and there are only seven currencies pair you need to focus on; the major currency pairs, which include EUR/USD, USD/JPY, GBP/USD, USD/CHF, and the three commodity pairs, USD/CAD, AUD/USD, NZD/USD. In contrast, there are thousands of stocks available on the market across a wide variety of sectors, Index trades, Derivatives trade, sector specific strategies, and many more. Moreover, Forex market is the most liquid market in the world which allows you to trade round the clock five days per week. It means that you are free to choose what time you are convenient with. Stock market, however, is more limited in time and has predetermined number of market hours.

Many people trade in Forex market because of its flexibility and liquidity while others prefer stock market since it can give higher return in the future. In Forex, short-selling is the part of every trade which means you are buying and selling at the same time. In stock market, it is almost impossible to short-sell due to the strict regulations. However, there are many investors who could double or triple their investment in short period of time. Although, stocks may give higher returns, Forex trading is favorable for its availability in information and tools. It is easy to access and everything about Forex is available on the web. On the other hand, information about stock such as revenues, profits, and losses are considered private and difficult to access.

Another advantage of Forex is its leverage. Leverage allows you to trade with higher leverage which can either give you big profits or big losses. In addition, the margins are low compared to the stock market. Most margin traders in the stock market need at least half of the value of their investment available in their margin accounts, whereas forex traders need as little as 1%. Also, Forex broker tends to ask for lower commission fee than stock broker.

About the Author: Bella Palmer

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