There are Forex traders who prefer to trade in the Forex market while others prefer the riskless advantage of stock trading. Both of them have their own advantages and disadvantages. It is better to know each one of them and compare which market works best for you.
The margin used in stock trading can go as high as 2:1 leverage. But for those day traders or those traders who open and close their trading position within a day, they are given as high as 4:1 leverage for a minimum balance of $25,000 and up. But not all traders can qualify to acquire such high leverage. There are requirements that you need to comply with before you get approved for a margin account in stock trading.
But the situation is different in Forex trading. There are no tough requirements to accomplish. All you need to do is to open a FX trading account. No qualifying requirements are needed but in the United States, the limit of leverage is only 50:1. However, in other countries, the leverage can go up to 400:1.
Stock trading requires you to buy company shares that will cost you as much as a hundred dollars. As for the price market, it varies with the demand and supply. Liquidity is different in FX trading and stock trading. In FX trading, there are instances in which a country’s currency fluctuates. But this is something that should not worry you because there are still a lot of currencies that you can choose from. Then, all major currencies in the world are considered highly liquid.
In FX trading, currencies are always traded in pairs. And since it involves currencies of different countries, you will be thinking of their economic health and get regular updates on it. FX trading will also keep you worried with different concerns. Emerging political, as well as economic condition, will also create worries on the trader’s part.
But if you chose to trade in the stock market, your only concern is the fall in the value of your stocks.
Price Sensitivity to Trade Activity
The stock market and the Forex market vary so much in price sensitivity. When you purchase stocks worth 10,000 shares, it will create a difference in the stock price, especially for small corporations having small shares.
But in FX trading, even if you invest millions of dollars in a particular major currency, it will create little to no impact on the Forex market.
In Forex trading, you can trade six days a week, 24 hours a day since there’s a lot of Forex exchange available worldwide. But in Stocks trading, it is only available 5 days a week, 24 hours a day and in the US, stocks trading is only available for retail traders from 9:30 a.m. to 4:00 p.m.
No Bear Markets (Forex Trading)
When your stocks decline, you can still make money through shorting. However, this poses additional risks. In the Forex market, you can easily go long and go short with a similar level of risks involved.