Forex shares

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market name	commission per trade	margin from*
FTSE 100 shares	0.08% (£10 minimum)	20%
other UK shares	0.08% (£10 minimum)	20%
US shares	1.8CPS (10 USD minimum)	20%

market name	spread	commission per trade	margin from*
FTSE 100 shares	market	0.08% (£10 minimum)	20%
other UK shares	market	0.08% (£10 minimum)	20%
US shares	market	1.8CPS (10 USD minimum)	20%

Equities are not available on the metatrader 4 platform.

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Investing in forex vs. Stocks

Today's active investors and traders have access to a growing number of trading instruments, from tried-and-true blue chip stocks to the fast-paced futures and foreign exchange (or forex) markets. Deciding which of these markets to trade can be complicated, and many factors need to be considered in order to make the best choice.

The most important element may be the trader's or investor's risk tolerance and trading style. For example, buy-and-hold investors are often more suited to participating in the stock market, while short-term traders—including swing, day and scalp traders—may prefer forex whose price volatility is more pronounced.

Key takeaways

Deciding whether to invest in the foreign exchange markets (forex) or stocks/stock indexes depends on he trader's or investor's risk tolerance and trading style.

Specific elements to compare include volatility, leverage, and market trading hours.

Broadly speaking, the equities markets—blue chip stocks and index funds—suit a buy-and-hold investor, while active traders often prefer the fast-moving forex.

Comparing forex to blue chip stocks

The foreign exchange market (aka forex) is the world's largest financial market, accounting for more than $6.6 trillion in average traded value each day in 2019, according to the most recent bank for international settlements. many traders are attracted to the forex market because of its high liquidity, around-the-clock trading and the amount of leverage that is afforded to participants.

Blue chips, on the other hand, are stocks of well-established and financially sound companies. These equities are generally able to operate profitably during challenging economic conditions and have a history of paying dividends. Blue chip stocks are generally considered to be less volatile than many other investments and are often used to provide steady growth potential to investors' portfolios.

So what would be the key differences to consider when comparing a forex investment with one in blue chips?

Volatility. This is a measure of short-term price fluctuations. While some traders, particularly short-term and day traders, rely on volatility in order to profit from quick price swings in the market, other traders are more comfortable with less volatile and less risky investments. As such, many short-term traders are attracted to the forex markets, while buy-and-hold investors may prefer the stability offered by blue chips.

Leverage. A second consideration is leverage. In the united states, investors generally have access to 2:1 leverage for stocks. The forex market offers a substantially higher leverage of up to 50:1, and in parts of the world even higher leverage is available. Is all this leverage a good thing? Not necessarily. While it certainly provides the springboard to build equity with a very small investment—forex accounts can be opened with as little as $100—leverage can just as easily destroy a trading account.

Trading hours. Yet another consideration in choosing a trading instrument is the time period that each is traded. Trading sessions for stocks are limited to exchange hours, generally 9:30 A.M. To 4pm eastern standard time (EST), monday through friday with the exception of market holidays. The forex market, on the other hand, remains active round-the-clock from 5 P.M. EST sunday, through 5 P.M. EST friday, opening in sydney, then traveling around the world to tokyo, london and new york. The flexibility to trade during U.S., asian and european markets—with good liquidity virtually any time of day—is an added bonus to traders whose schedules would otherwise limit their trading activity.

Should you trade forex or stocks?

Comparing forex to indexes

Stock market indexes are a combination of stocks, with some sort of element—either fundamental or financial—which can be used as a benchmark for a particular sector or the broad market. In the U.S. Financial markets, major indexes include the dow jones industrial average (DJIA), the nasdaq composite index, the standard & poor's 500 index (S&P 500), and the russell 2000. The indexes provide traders and investors with an important method of gauging the movement of the overall market.

A range of products provide traders and investors broad market exposure through stock market indexes. Exchange-traded funds (etfs) based on stock market indexes, such as the SPDR S&P 500 ETF trust (SPY) and the invesco QQQ, which tracks the nasdaq 100 index, are widely traded.

Stock index futures and e-mini index futures are other popular instruments based on the underlying indexes. The e-minis boast strong liquidity and have become favorites among short-term traders because of favorable average daily price ranges. In addition, the contract size is much more affordable than the full-sized stock index futures contracts. The e-minis, including the e-mini S&P 500, the e-mini nasdaq 100, the e-mini russell 2000, and the mini-sized dow futures are traded around the clock on all-electronic, transparent networks.

So what would be the key differences to consider when comparing a forex investment with one that plays an index?

Volatility. The volatility and liquidity of the e-mini contracts are enjoyed by the many short-term traders who participate in stock market indexes. Let's say that the major equity index futures trade at an average daily notional value (the total value of a leveraged position’s assets) of $145 billion, exceeding the combined traded dollar volume of the underlying 500 stocks. The average daily range in price movement of the e-mini contracts affords great opportunity for profiting from short-term market moves. While the average daily traded value pales in comparison to that of the forex markets, the e-minis provide many of the same perks that are available to forex traders, including reliable liquidity, daily average price movement quotes that are conducive to short-term profits, and trading outside of regular U.S. Market hours.

Leverage. Futures traders can use large amounts of leverage similar to that available to forex traders. With futures, the leverage is referred to as margin, a mandatory deposit that can be used by a broker to cover account losses. Minimum margin requirements are set by the exchanges where the contracts are traded, and can be as little as 5% of the contract's value. Brokers may choose to require higher margin amounts. Like forex, then, futures traders have the ability to trade in large position sizes with a small investment, creating the opportunity to enjoy huge gains—or suffer devastating losses.

Trading hours. While trading does exist nearly around the clock for the electronically traded e-minis (trading ceases for about an hour a day to enable institutional investors to value their positions), the volume may be lower than the forex market, and liquidity during off-market hours could be a concern depending on the particular contract and time of day.

Tax treatment: forex vs. Equities

These various trading instruments are treated differently at tax time. Short-term gains on futures contracts, for example, may be eligible for lower tax rates than short-term gains on stocks. in addition, active traders may be eligible to choose the mark-to-market (MTM) status for IRS purposes, which allows deductions for trading-related expenses, such as platform fees or education.

In order to claim MTM status, the IRS expects trading to be the individual's primary business. IRS publication 550 covers the basic guidelines on how to properly qualify as a trader for tax purposes. traders and investors alike should seek the advice and expertise of a qualified accountant or other tax specialist to most favorably manage investment activities and related tax liabilities, especially since trading forex can make for a confusing time organizing your taxes.

The bottom line

The internet and electronic trading have opened the doors to active traders and investors around the world to participate in a growing variety of markets. The decision to trade stocks, forex or futures contracts is often based on risk tolerance, account size, and convenience.

If an active trader is not available during regular market hours to enter, exit or properly manage trades, stocks are not the best option. However, if an investor's market strategy is to buy and hold for the long term, generating steady growth and earning dividends, stocks are a practical choice. The instrument(s) a trader or investor selects should be based on which is the best fit of strategies, goals, and risk tolerance.

Forex vs. Stock trading

Graphic of world currency rates for forex trading.

One of the biggest reasons some traders prefer the forex to the stock market is forex leverage. Below, we compare the differences between stock trading and forex trading.

Leverage

In stock trading, traders with a margin account use as much as 2:1 leverage. However, day traders who open and close their positions within a single day can trade up to 4:1 leverage if they have an account balance of more than $25,000. there are also some qualifying requirements before you can do this. not every investor is approved for a margin account, which is what you need to leverage in the stock market.

Forex trading is very different. To qualify to trade with leverage, you open a forex trading account. There are no qualifying requirements. In the united states, you're limited to 50:1 leverage, but in other countries, you can leverage as much as 400:1.

Liquidity differences

When you trade stocks, you buy shares of companies that cost anywhere from a few dollars to hundreds of dollars. Market price varies with supply and demand. Trading on the forex is a different world. Although the supply of a country's currency can fluctuate, there is always a large amount of currency available to trade. In consequence, all major world currencies are highly liquid.

Paired trades

In currency trading, currencies are always quoted in pairs. Not only do you have to be concerned with the economic health of the country whose currency you are trading, but also with the economic health of the country against which you are trading.

Your fundamental concerns also differ from one market to another. When you buy intel shares, your primary concern is whether the stock will increase in value— you're less concerned with the stock prices of other companies. When you're buying or selling on the forex, on the other hand, you have to consider the economics of two countries. Does one country have more job growth than another, or better GDP, or political prospects? A successful single trade on the forex, therefore, requires analyzing two financial entities, not one. Forex markets sometimes exhibit greater sensitivity to emerging political and economic situations in other countries; the U.S. Stock market isn't immune but is usually less sensitive to such foreign issues.

Price sensitivity to trade activity

The two markets have very different price sensitivity to trade activity. Stock purchase of 10,000 shares may impact the stock price, particularly for smaller corporations with fewer shares outstanding than, for instance, giants like apple.

In sharp contrast, forex trades of several hundred million dollars in a major currency will most likely have little—or no—impact on the currency's market price.

Market accessibility

Currency markets have greater access than stock markets. Although in the 21st century, it's possible to trade stocks 24 hours a day, five days a week, it's not particularly easy. Most retail investors trade through a U.S. Brokerage with one major trading period daily, from 9:30 a.M. To 4:00 p.M., with a much smaller "after hours" trading market with known volatility and price issues that discourage many retail investors from using it. Forex trading, on the other hand, can be done six days a week, 24 hours a day, because there are many forex exchanges worldwide—it's always trading time in one time zone or another.

No bear markets in forex trading

When a stock market declines, you can make money by shorting, but this imposes additional risks, one of which is that (at least in theory) you may have unlimited losses. In reality, that's unlikely to happen. At some point, your broker will end the short position. Nevertheless, most financial advisors caution against shorting for all, and many of the most experienced investors execute parallel stop-loss and limit orders to contain this risk.

In forex trading, you can go short on a currency pair as easily as you can go long. The two positions present similar risks. No additional precautionary trades to limit losses are necessary.

Greater freedom from regulation

Stock trading on major exchanges has many regulations and limits; forex trading is less regulated. In some ways, the regulatory environment of the major stock exchanges imposes limits you may not welcome; it also protects you and other investors to a degree the forex does not.

It's your choice

Most investors are more familiar with the stock market than with forex, and that familiarity may be comforting. The comparative freedom from regulation on the forex and its high degree of possible leveraging makes it easy to control large trades without special qualifications and a limited amount of money. That's the upside of the forex market, and the downside—participation in the forex increases both investment opportunities and risk.

Forex vs stocks: which one should you trade?

Our guide on forex vs stocks will enable you to decide which is the better market for you to trade on. We will compare the general differences between them in terms of trading, trading options, liquidity, trading times, the focus of each market, margins, leverage, and more!

Anyone new to trading is likely to wonder, "which is better: forex or stocks?" let's begin answering our question with a little economics 101. We find ourselves today in a low interest rate environment. Central banks around the world are still wrestling with low growth for the most part. Loose monetary policy has been their main answer over the years. So what's the upshot for you?

Basically, leaving money in the bank does you little good. In many of the major economies, interest paid on savings is less than the rate of inflation. As a natural result, people are searching for better alternatives to invest their money into, such as the well-established financial markets of forex and stocks. This article will consider the pros and cons of forex trading and stock trading.

Forex vs stocks: markets

There is no hard or fast answer to the question of which is better. Whether we are talking about for experienced traders or forex vs stocks for beginners, when comparing, there will be benefits and drawbacks for each market and for each type of trader. It ultimately comes down to how important those features are to you personally. Let's take a look at an overview of each market first, and then we can move on to drawing some conclusions about forex vs. Stock trading.

The forex market is decentralized. It represents a trading network of participants from around the world. The large players in the forex market include investment banks, central banks, hedge funds, and commercial companies.

The stock market is the overarching name given to the combined group of buyers and sellers of shares, or stocks. Shares in a company, as the name suggests, offer a share in the ownership. Usually, though not always, these transactions are conducted on stock exchanges. In order to raise capital, many companies choose to float shares of their stock.

Stock exchanges provide a transparent, regulated, and convenient marketplace for buyers to conduct business with sellers. Trading on these exchanges has historically been conducted by "open outcry," but the trend in recent years has been strongly toward electronic trading.

The stock market is immensely popular, but it is exceeded in size by the forex market, which is the largest financial market in the world. When we weigh up the forex market vs the stock market in terms of size, forex takes the round. Why do we care about the size? The greater the size of the forex market, the greater its liquidity will be.

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Comparing liquidity

The forex market is extremely liquid. This is a result of the vast number of participants involved in trading at any given time. Large, popular stocks can also be very liquid. Vodafone and microsoft are prime examples. Though once you move away from the blue chips, stocks can become significantly less liquid.

Why do we care about liquidity?

Liquidity makes it easier to trade an instrument. Generally speaking, superior liquidity tends to equate to proportionally tighter spreads, and lower transaction costs. Let's consider a trading example, and compare some typical costs. Let's use microsoft as our liquid share, and EUR/USD as our liquid currency pair.

When trading microsoft, you would pay:

A market spread

Commission to your broker

The price of microsoft (at the time of writing) is around $52 a share. The market spread might typically range anywhere from 2 cents to 5 cents for microsoft in normal market conditions. This is a range of roughly 0.04% to 0.09%. Commission rates vary from broker to broker, but you might pay 10 cents per share. The commission is paid upon the opening and the closing of the trade.

Now let's compare that to EUR/USD. The most common type of retail FX trading is on a spread basis with no commission. This is the way in which the trade.MT4 account works. On such an account, you might pay 1 pip of spread to trade EUR/USD, with no commission. If you are interested in trading with admiral markets, it's important to note there is a selection of account types available that offer a variety of services.

With EUR/USD trading at 1.1190, this is a round-trip transaction cost of 0.0001/1/1.1190. Want to know what that works out to as a percentage? It's less than 0.01%. In the case of this comparison, forex has the upper hand. The round-trip spread cost of trading the FX position is less than the market spread on the share. And there's more: once you factor in the share commission, the FX trade is even more cost effective. You can also view real market prices with a demo trading account, as well as a live account.

Source: metatrader 4 - demo account - trade terminal & market watch

Narrow vs. Wide focus

Perhaps a key difference when it comes to forex vs stocks is the scope of the trader's focus. When looking at an individual share, you can get away with concentrating on a fairly narrow selection of variables. While you are likely to take note of wider trends, factors directly affecting the company in question will be more important, along with the market forces within its specific sector. Relatively narrow metrics will be of chief importance, such as the company's:

Debt levels

Cash flows

Earnings guidance

With forex, the focus is wider.

A currency reflects the aggregated performance of its whole economy. FX traders are therefore more interested in macroeconomics. This is where the technical analysis of forex vs stocks differs. In forex, the focus will be more on general indicators such as:

Unemployment

Inflation

GDP (gross domestic product)

These will take precedence over the performance of private sectors. When you trade an FX pair, you are trading two currencies at once. You will always be buying one currency, while selling the other currency in the pair.

A fundamental trader, therefore, factors in the performance of not just one economy, but two. Of course, you may focus on technical strategies instead of looking at fundamentals.

Comparing trading times

The FX market is a 24-hour market, and it has no single central location; therefore, participants are spread across the globe; and there is always a part of the market that is in business hours. Trading a listed stock is limited, for the most part. Stock traders must adhere to the hours of the stock exchange. However, several major exchanges have introduced some form of extended trading hours. Stock traders may be able to participate during pre-market, and after-market trading periods.

These were once the domain of institutional investors only. Advances in electronic trading have made it increasingly accessible by retail investors also. The catch is that extended trading sessions remain notably low volume and non-liquid. When comparing volumes across a 24-hour period, FX wins again. If you are looking to trade at any given time, the comparison is a simple one - forex is the clear winner.

Margin and leverage

A big advantage in favour of forex trading vs stock trading is the superior leverage offered by forex brokers. With leverage, a trader with a smaller amount of money can, potentially, earn a larger profit in forex vs stocks profit. However, while profits can be much larger, losses can also be multiplied by the same amount, very quickly. It is in this way that forex is riskier than stocks. But, if you are physically trading stock, you are likely trading without the benefit of leverage. If you trade stocks using cfds (contracts for difference), you can trade on margin. Usually, the best kind of leverage offered is 1:10. It is not unusual for FX brokers to offer 1:50 leverage, while admiral markets offers leverage of up to 1:30 for retail clients, and 1:500 for professional clients.

You can find all the details regarding retail and professional terms, the benefits, and the trade-offs for each client category on the admiral markets website.

This offers the convenience of being able to command a larger position for a given cash deposit. Of course, it is important to be aware of how big your underlying position actually is, and to fully understand the risks involved. Leverage can be a powerful tool, but it can also put a quick stop to your activities.

Conclusion

So which should you go for in 2021? - forex or stocks? In trading, the bottom line is always to stick with what works. This means going with what works best for you. If you know more about one market than the other, you might be better off staying in your area of your expertise. If you are naturally more interested in individual companies, then it would make sense for you to trade stocks.

If you think more in terms of macroeconomics, FX may suit you better. If you don't have a particular inclination, but are mindful of transaction costs, FX might be the way to go. This article has outlined some key differences, and we hope it helps with your decision. Whichever side you choose, you will be able to trade it with admiral markets as we offer the ability to trade on forex, cfds, etfs, stocks and more with metatrader 4 supreme edition.

Trade with admiral markets

If you're feeling inspired to start trading, or this article has provided some extra insight to your existing trading knowledge, you may be pleased to know that admiral markets provides the ability to trade with forex and cfds on up to 80+ currencies, with the latest market updates and technical analysis provided for FREE! Click the banner below to open your live account today!

About admiral markets

Admiral markets is a multi-award winning, globally regulated forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: metatrader 4 and metatrader 5. Start trading today!

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Forex vs. Stock trading

One of the biggest reasons some traders prefer the forex to the stock market is forex leverage. Below, we compare the differences between stock trading and forex trading.

Leverage

Liquidity differences

Paired trades

Price sensitivity to trade activity

In sharp contrast, forex trades of several hundred million dollars in a major currency will most likely have little—or no—impact on the currency's market price.

Market accessibility

No bear markets in forex trading

In forex trading, you can go short on a currency pair as easily as you can go long. The two positions present similar risks. No additional precautionary trades to limit losses are necessary.

Greater freedom from regulation

It's your choice

Forex vs stocks: which should you trade?

Forex and stocks are two of the most popular global markets. Before you start trading either, it's vital to know which is best suited for your trading strategy and risk appetite. Look at our comparison and learn the differences.

What is the difference between forex and the stock market?

The largest difference between forex and the stock market is, of course, what you are trading. Forex, or foreign exchange, is a marketplace for the buying and selling of currencies, while the stock market deals in shares – the units of ownership in a company. Primarily, your decision about whether to trade currencies or stocks should be based on which asset you are interested in trading, but there are some other factors you need to consider.

Market trading hours

The opening hours of a market can have a significant influence over your trading, impacting the time you will need to spend monitoring the markets.

As forex is a completely global market, you can trade 24 hours a day, five days a week. This provides you with ample opportunities for trading, but also creates the risk of the market moving while you aren’t around to monitor it. If you decide to trade forex, it is important to create a risk management strategy with appropriate stops and limits to protect your trades from unnecessary losses.

The best time of day to trade forex is when the market is the most active, which is usually when two sessions overlap, as there will be a higher number of buyers and sellers. For example, if you were interested in GBP/USD, london and new york trading hours overlap between 12pm to 4pm (london time). The increased liquidity will speed up transactions and even lower the cost of spreads.

Share trading is slightly different, as it is often limited to the opening hours of whichever exchange the shares are listed on. Increasingly extended hours are being offered to traders, which means you can act quickly on breaking news, even when the market is closed.

Market influences

Another factor to consider before trading forex or shares is what moves market prices. Primarily, both markets are influenced by supply and demand, but there are a host of other factors that can move prices.

When share trading, you will need to focus on a few factors that directly impact your chosen company – including the company’s debt levels, cash flows and earnings – as well as economic data, news reports and sector health.

But with forex, the focus tends to be far wider, as a more complex range of factors can impact market pricing. You generally need to take the macroeconomics of the country into consideration – for example, unemployment, inflation and gross domestic product (GDP), as well as news and political events. And because you are buying one currency while selling another, you need to be aware of the performance of not just one economy, but two.

Liquidity

Liquidity is the ease at which an asset can be bought or sold in a market. It is an important consideration because the higher the volume of traders, the more money there is flowing through the market at any time – making it easier for you to find someone to take the other side of your position.

Forex is the largest and most popular financial market in the world, which means it is extremely liquid and frequently sees a daily turnover of trillions of dollars.

Market liquidity can fluctuate throughout the day as different sessions open and close around the world, but it also varies greatly depending on which FX pair you choose to trade. Just eight currency pairs account for the majority of trading volume – for example, the dollar is involved in almost 75% of all forex trades according to the bank of international settlements (2016).

The stock market sees comparatively fewer trades per day, but shares are still easy to access and trade. Large, popular stocks – such as apple, microsoft or facebook – are the most liquid as there are usually willing buyers and sellers, but once you move away from blue chips there is often significantly less liquidity.

Volatility

Volatility is a measure of how likely it is that a market’s price will make major, unforeseen price fluctuations. A market with high volatility will see its prices change quickly, whereas markets with low volatility tend to have more gradual price changes.

The ease at which forex can be traded makes it extremely volatile. Though the market will usually trade within a small range, the vast number of trades taking place on the forex market can cause prices to change extremely quickly. When trading forex it is important to keep up to date with political, economic and social events, as the market is prone to sudden and drastic movements in response to these announcements.

The stock market tends to have more stable price patterns that you can track over time. But, like forex, it can see periods of volatility and is especially sensitive to domestic politics. For example, the dow jones fell sharply in march 2018 as american companies suffered from US president donald trump’s trade tensions with china.

Trading volatility can potentially provide a lot of opportunities for traders to profit, but it also comes with increased risk, making it important to take steps to prevent unnecessary loss.

Leverage

Trading on leverage enables you to gain exposure to markets with just a fraction of the capital normally required. Leveraged products, such as spread betting and cfds, can be used to trade on margin across a range of markets.

Though it can be an advantage of both share trading and forex trading alike, it is more commonly cited as a feature of currency trading. Forex trades usually have a much larger leverage ratio, in some countries as much as 200:1. But leverage is a double-edged sword: though it can magnify returns, it can also magnify losses.

Whichever market you choose, it is important to be aware of the size of your exposure, and understand the risks involved.

Going long or short

When deciding between forex and the stock market, it is important to identify all the opportunities available to you – notably, can you short sell? The ability to short a market opens you up to a whole new dimension of market movements, enabling you to speculate on both rising and falling markets.

As forex trading involves buying one currency and selling another, traders have always been able to access falling markets.

When investing in shares, you could traditionally only take a long position, as you’d be looking to profit from any future increase in the value of a company’s stock. But thanks to derivative products, such as spread bets or cfds, you can go long and short on company shares – giving you equal access to trading opportunities whatever the future direction of the market.

Find out how to short sell

Should you trade forex or stocks?

When it comes to deciding whether you should trade forex or stocks, there is no definitive answer because there are benefits and drawbacks to each market. Ultimately, your decision will come down to your personal preferences and attitude toward risk.

When making your decision, you need take into consideration your trading style and financial goals. If you are interested in a fast-paced environment, forex provides ample opportunities for short-term traders – such as day traders, scalp traders or swing traders. If you’re looking to take advantage of short to mid-term trends, or less volatility, the stock market could be for you.

Forex vs stocks which is more profitable?

If you are new to trading, and you are trying to decide what to invest in, you may have run across a typical dilemma that traders often encounter — is it better to go for stocks or the forex market? Which one is more profitable?

These days, when trading and investing are as easy as making a few clicks on your computer, the question of which of these you can go for becomes irrelevant. The new question is which one you should go for, and that is what we are going to explore today.

Forex vs stock market

In order to better understand which of the two is better, let us first recap what these two markets are all about.

Let's start with the stock market, as people are typically more familiar with it. The stock market, naturally, trades stocks, or shares. Stocks are financial instruments that represent ownership in a company. Apart from that, they also represent a proportionate claim on the assets that the company owns, as well as the earnings that it is making.

Basically, you can split ownership of a company into smaller parts and sell them to a number of people who are willing to pay to become their new owners. They become the company's shareholders, and they own a slice of the firm. The more shares you own, the greater the percentage of ownership of the firm itself.

On the other hand, we have forex, or FX, also called foreign exchange. Forex trading basically revolves around buying and selling foreign currencies in order to make a profit.

If you have ever compared the prices of different currencies, you likely understand the bottom line. That bottom line is — use some of your money to buy foreign currency. When its price goes up, sell it before it comes crashing down. The difference between the price at which you bought the currency, and the one you sold at represents your profit or loss.

The more money you have, the more you can buy, and if you get it right, the more you can earn once the price moves favorably. Of course, you can also lose more if you get it wrong, and the price actually falls instead of growing.

Similarities and differences between forex and stocks trading

Now that we know which is which, it is time to talk about what makes them similar, and what makes them different.

For example, both the forex and the stock markets are fully-developed and regulated markets around the world. They have millions upon millions of active traders and investors, with their numbers growing in the past several years.

Forex became very popular in the past few years, and more and more people are joining up, many of which have chosen this way of earning to make a living.

That is where the similarities end and differences begin. For example, one of the bigger differences lies in the availability of the market. As you may know, the stock market is only available during business hours. Forex trading, on the other hand, is available 24 hours per day. This gives forex traders an edge when it comes to short-term trading.

Another difference is liquidity. Forex has the advantage here, as well, as people always look to buy or sell foreign currencies, whether for use or trading purposes. Of course, markets with high trading volumes are by default more liquid.

However, in the stock market, trading stocks with lower volume is difficult, as you sometimes simply cannot find interested buyers. This makes it harder to sell stocks whenever you want to, which, in turn, can lead to great losses.

There is also a matter of volatility, which can strongly affect your profits, which leads us to our next segment:

Short-term trading

The thing about stocks is that they are the best for long-term investments. You find a company that you have high hopes for, purchase its stocks, and forget about them for weeks, months, or even years.

In the meantime, you get paid a bit simply for holding them, but the real money will come as the company develops and becomes more successful. This leads to the growth in the price of its shares, and therefore, when you decide to sell, you get a lot more than what you originally paid for.

If you are more interested in short-term trading, then forex is a much better way to go.

Of course, the stock market does have day-trading, which basically means that you can buy stocks in the morning, and sell them in the afternoon. You bought and sold within the same day, and the price movement for that day determines how much you will earn or lose.

However, stocks are not that volatile, and their price within a single day can move very little, except for situations where the company suddenly got under the spotlight.

One recent example of this was germany-based wirecard, which found itself both, under the spotlight as well as under heavy fire due to the fact that as much as $1.9 billion was discovered to be missing from its accounts. The negative publicity, the investigation, and freezing of the firm's accounts led to a massive stock price crash.

However, for the most part, stocks do not often grow and drop that much on a daily basis.

Forex, on the other hand, does. The prices of currencies are always changing, depending on events, reports, geopolitical situations, and more. They go up and down all the time, and as such, they make forex perfect for short-term trading.

Add the fact that forex markets are available 24 hours per day, and you can truly make use of the market changes.

Which is easier to trade?

When it comes to trading, there is no longer such a thing as easier or harder. All trading, from a technical standpoint, is extremely easy these days. As mentioned before, all you need to do is click a couple of times, and your purchase or sale is done.

However, when it comes to how to be a successful trader, both are pretty much equally as hard.

There are no shortcuts here, and you will have to spend some time learning, whether you decide to go for forex or stocks. Simply put, you will need to learn how the market works, and the best way to do so is a combination of theory and practice.

As far as theory goes, you should read reports, predictions, guides, and explanations on how both markets work. You can also follow professionals on social media and get their own two cents about the markets.

When it comes to stocks, you need to research the firm whose shares you are buying, study its roadmap, its reputation, its officials' reputation, its partners — basically everything.

The stock moves up and down based on the public opinion of the company, which means that you must be aware of everything that is happening to the firm, but also know how the people are going to react to the changes. For example, new partnerships are almost always a good sign that could lead to a stock price growth,

A resignation of a popular official, on the other hand, would make shareholders worry about the future of the company, which might cause many to start selling, which would lead to a price drop, as the demand weakens.

This is not the case when it comes to forex. You don't really have a company or a CEO to look into — it is simply a currency of some foreign land, which changes based on supply and demand, the overall state of the economy within the country, and similar aspects.

These need to be studied as well, of course, but the thing is that most of the forex price movements are impossible to predict, and you will simply have to react quickly on the price changes, rather than try to predict which way the price will go.

This is why short-term trades are the best approach to forex, while the stocks can be traded quickly, or invested in for longer periods. As long as the company doesn't fail completely, there is still a chance for its stock to see price growth at a later date.

Forex vs stock: the cost of trading

Now, to establish which is truly the most profitable — stock trading or forex trading — we must also keep in mind the cost of actual trading. That means keeping in mind various fees, such as trading fees, account maintenance costs, and alike.

When it comes to the average cost of trading stock online, one study concluded that the average fee per trade, if you were to trade on your own, would be around $8.90. Of course, the fees vary from platform to platform, but the lowest one was at around $5, while the highest one sat at almost $20.

When looking into the fees of 15 brokerages, the average fee ended up being just short of $9. But, that is if you trade on your own, as mentioned. If you make use of the brokers' services, your so-called broker-assisted fee is much higher — $30.99 on average.

Naturally, this is only a part of it, a fee that revolves around direct transactions. You still need to pay to have your account there, which, on average, also ends up being at around $32-50.

There are also plenty of other fees, many of which are handled differently, depending on the platform. Some fees are quite high on one platform but eliminated on another. Some fees do not have anything to do with the brokerage, but with the bank you use, such as the wire transfer fee, but they still need to be included, as they take a chunk of your profits away from you.

Meanwhile, when it comes to trading forex, you have all kinds of costs there, as well. Most will vary from broker to broker, and some costs are optional, such as paying to receive the fresh news. However, we are more interested in looking into how much you necessarily have to pay to trade forex.

With that in mind, you have spread rates, which can depend on various things, such as market volatility, and the currency pair itself. This can vary heavily from platform to platform. The minimum spread can sometimes be 0. Average spreads, however, can be at around 0.15 for pairs like EURUSD, or USDJPY. They can go even higher for other pairs, like USDCHF, or GBPUSD, but, as mentioned, it all depends on your broker, trading platform, and alike.

Then, there are commission costs, of course, which can also be either a fixed fee or a relative fee. A fixed fee remains the same regardless of how big your transaction ends up being, while a relative fee grows with higher amounts. So, you may end up paying $1 for $100,000, or $100 if you buy $10,000,000.

Of course, swap rates should also be included in your calculations, which are basically a rollover interest for keeping your position open overnight. Some traders prefer to do so and pay to keep their positions open, while others would rather close them before the end of the day. In the end, the decision is yours, and this is one fee that you can choose not to pay simply by modifying your strategy in a way that will see you open and close a position in a single day.

In the end, forex traders can make huge gains. However, the FX market remains quite volatile, which means that you can also make huge losses. The stock market is less volatile, so your investment will not show immediate returns, which is why they are typically long-term investments.

Conclusion

So, which one is more profitable, stock or forex?

In the end, there is no right answer when it comes to which is better, stock, or forex trading. It depends more on your own trading style and your own preferences.

If you wish to make a quick profit, forex is likely the best way to go. If you have patience and the will to do heavy research, and then make long-term investments, stocks are the best way to go about it. If you want to make short-term stock trades, you can do that as well, but you should not expect major price changes on a daily basis.

The decision is yours, and your preference is all that matters. Once you decide on that, and you do some thorough research, you will be able to move forward and make profits by exploiting the price changes in your asset of choice.

Author: ali raza - A journalist, with experience in web journalism and marketing. Ali holds a master's degree in finance and writes extensively about the financial markets and fin-tech industries.

Why trade forex: forex vs. Stocks

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 trade? Got the time to stay on top of so many companies?

Aren’t seven major pairs much easier to keep an eye on than thousands of stocks?

Look at mr. Forex. He’s so confident and sexy. Mr. Stocks has no chance!

That’s just one of the many advantages of the forex market over the stock markets. Here are a few more:

24-hour market

The stock market 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.

The forex market is a seamless 24-hour market. Most brokers are open from sunday at 5:00 pm EST until friday at 5:00 pm EST, with customer service usually available 24/7.

With the ability to trade during the U.S., asian, and european market hours, you can customize your own trading schedule.

Minimal or no commissions

As a lot of online stock brokers now offer zero commissions, so this is now less of a factor.

Most forex brokers charge no commission or additional transaction fees to trade currencies online or over the phone.

Most brokers are compensated for their services through the bid/ask spread.

Higher trading volume and liquidity

The forex market sees an average daily turnover of $6.6 trillion.

The stock market sees a fraction of this.

Short-selling without an uptick

Unlike the equity market, there is no restriction on short selling in the currency market. Trading opportunities exist in the currency market regardless of whether a trader is long OR short, or whichever way the market is moving.

Since currency trading always involves buying one currency and selling another, there is no directional bias to the market. So you always have equal access to trade in a rising or falling market.

Minimal market manipulation

How many times have you heard that “fund A” was selling “X” or buying “Z”? The stock market is very susceptible to large fund buying and selling.

The FX market is sufficiently liquid that significant manipulation by any single entity is all but impossible during active trading hours for the major currencies.

Banks, hedge funds, governments, retail currency conversion houses, and large net worth individuals are just some of the participants in the spot currency markets where the liquidity is unprecedented.

Analysts and brokerage firms are less likely to influence the market

Have you watched TV lately? Heard about a certain internet stock and an analyst of a prestigious brokerage firm accused of keeping its recommendations, such as “buy,” when the stock was rapidly declining?

Ipos are big business for both the companies going public and the brokerage houses.

Relationships are mutually beneficial and analysts work for the brokerage houses that need the companies as clients. That catch-22 will never disappear.

Foreign exchange, as the prime market, generates billions in revenue for the world’s banks and is a necessity of the global markets. Analysts in foreign exchange have very little effect on exchange rates; they just analyze the forex market.

Advantages	forex	stocks
24-hour trading	YES	no
minimal or no commission	YES	maybe
liquidity	HUGE	meh
short-selling without an uptick	YES	no
no market manipulation	depends	no

In the battle between forex vs. Stocks, it looks like the scorecard between mr. Forex and mr. Stocks shows a strong victory by mr. Forex! Will it go for 2-0 with mr. Futures?

Forex shares

Take actions on forex market, the most popular trading market in the world, with a market leader the capital stocks .

1. The most attractive spreads rates with EUR/USD as low as 0.8
2. Maximize your potential trading positions with exceptional trade executions
3. Trade 24 hours a day, 5 days a week

Understand forex

To speak with facts, the US stock market trades approximately $257 billion a day; quite a big amount of total transactions, but it represents a fraction of what forex trades in total. Forex market trades 24 hours a day, during the 5 business days, across banks, various institutions, and individual traders worldwide.

The activity of forex include the process of buying one currency and simultaneous selling another one. They pretend to profit from the difference in the prices of buying and selling, hopefully, they will buy at a lower price and sell with a higher one.

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At the capital stocks , the cost of trading currencies is reflected in the bid/ask spread.

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Trading forex (foreign exchange) or cfds (contracts for difference) on margin carries a high level of risk and may not be suitable for all investors. There is a possibility that you may sustain a loss equal to or greater than your entire investment. Therefore, you should not invest or risk money that you cannot afford to lose. Before using thecapitalstocks.Com services, please acknowledge all of the risks associated with trading. The content of this website must not be construed as personal advice. We recommend that you seek advice from an independent financial advisor. We use cookies for the following purposes: to enable certain functions of the service, to provide analytics, to store your preferences, to enable advertisements delivery, including behavioral advertising. We use both session and persistent cookies on the service and we use different types of cookies to run the service.

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