Today people have access to a larger number of trading options, from the traditional blue-chip stocks to the fast-paced foreign exchange markets. The two most popular markets for trading are forex and the stock market. While you can use both to make investments and get good returns, several factors need to be considered before picking either. We’ve created this guide to help you understand both markets better.
Difference Between Forex And Stocks
The foreign exchange market or forex is undoubtedly the biggest liquid financial market globally, with an endless amount of currency pairs to trade. Forex traders use pips to understand price movements to determine whether the market will move up or down. In forex trading, the top currency pairs for trading are EUR/USD, GBP/USD, USD/JPY.
On the other hand, the stock market deals with blue-chip stocks and penny stocks to determine the financial standing of companies. Additionally, several factors affect the short and long-term prices of the shares, and a disturbance in any of these factors can drive the prices lower. The most popular companies that offer promising shares are those with large market capitalization, such as Apple, Amazon, and Microsoft.
Why Trade Forex?
If you’re interested in short-term trading, then forex is the right market. The opportunities are endless, and you can use exotic pairs of currencies to get more attractive returns. Another important factor is time, and forex markets aren’t time-sensitive. So you can trade at any time you want.
Forex also has the highest trading volume of around $6 trillion, making it a market with high liquidity, and since the market is straightforward, it’ll be easier for you to get the hang of things.
Why Trade Stocks?
Stocks are preferred by traders who are in it for the long term. Stocks allow you to look for a potential company, buy stocks, hold them for a few years until the company grows, and then you can make profits by selling or trading them. Additionally, with stocks, the fluctuations aren’t that quick. Some factors can influence the prices, but they don’t go up and down like they do in forex.
One downside of stock trading is that it’s time-sensitive. Unlike forex markets, stock trading follows specific hours after which you can’t trade or buy stocks.
The Bottom Line
The bottom line is that the trading mode you pick depends on your requirements. For short-term trading, forex is good, but these tradings require constant attention and market knowledge. However, for stocks, you need to watch the market for some time before you can make predictions.
If you’re interested in polishing your trading skills and increasing your profits, check out Trading Mentor. We are an online mentoring platform that helps retail traders become trading experts by getting mentored by our experts. These traders can find mentors based on their experience, nationality, and rating. We require you to tell us what you’re looking for in a mentor, and we’ll match you with the correct one. You’ll also get a free consulting call from your chosen mentor.