Should I Invest in Forex or Stocks?
Every trader would have possibly come across this question once in their life. Not all the old traders might be active in forex because of the cynicism that drives them away from the trade. Both the trades have a fair share of benefits and risks that could baffle the aspiring traders. Stocks and forex have a few similarities and differences that set them apart with distinct features. Your choice must be made after checking the differences; look for the features that stand out and are appealing to you. See if the trade suits your tastes and have benefits that you can leverage upon. There surely are advantages to both these trading options, but the final choice has to made by ruling out the one that is way out of your comfortable form of trade.
Stocks is the buying and selling of shares of individual companies, and forex involves buying and selling of currency in exchange for another. The most fundamental concept differs in both and, therefore, have a set of advantages that come into action in different situations. Let us have a look at the differences between these two types of trading to see which is the better option and for what.
Stocks Vs. Forex
Comparisons of stocks and forex have been going on for a long time now, and it has guided most people in reaching the right decision. The major differences between stocks and forex are:
This is considered as the biggest difference between the two, and forex is the winner here with the size. Around $5 trillion are traded every day in forex, whereas in stocks only about $200 billion are traded. Most of the forex trade is concentrated on the major pairs such as EUR/USD, AUD/USD, GBP/USD, and USD/JPY. By having a higher volume, the traders can get their orders executed quickly.
High volume leads to high liquidity, and this will lend the trade lower transactions and tighter spreads. If you are planning to trade forex, this would be the most significant advantage that comes across because you get to trade with low spreads and transaction costs compared to stocks.
· Market Hours
When forex markets function all day round for 5 days a week, stocks have a different approach. As forex has no central authority controlling the transaction, the deal can be made from any country at the respective time zone comfortably.
· Virtually Zero Commission
Going for forex trade isn’t a bad idea because the commission charged by brokers are also trivial or even zero, meaning you wouldn’t have to spend a few more dollars on the trade that you are doing for profits.
· Narrow and Wide Focus
Forex has a narrow focus over the currencies that are traded with only eight pairs to keep a tab on, whereas stocks have thousands that are hard to keep track of. Monitoring of the market conditions and the value of the currencies are essential for a successful trade.
Investing in forex is a wise decision as long as you use relevant strategies to generate profits. If you have better expertise in one form of trade, you should stay there and leverage more with the features available. When you want to invest in individual companies, go for stocks, but look for the times when the market is rising since low liquidity would make it difficult to sell in the falling markets. Forex is lucrative almost always since both buying and selling is involved in every trade and high liquidity accompanies it.