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The difference between the stock market and forex

 The difference between the stock market and forex

There have been many misunderstandings when referring to facts about the Forex and the Stock market. The first thing you need to know is that they are two different market places. However similar they might be, they are two different places and are governed by similar but very different rules. The term �forex’ is a combination of the words �foreign and exchange’ and as you should guess, this is the market you would go to trade in currencies. You buy, sell and exchange your currencies and the current values. This is the largest trading market in the world when view it from a trading volume aspect.

The stock market although similar in operations to the forex market offers those interested, a platform to buy, sell and trade stocks, equities, or shares including those that are privately traded. There are several differences between the stock and the forex market that one interested in trading should know. This knowledge will definitively benefit your future endeavors. 

The difference between the stock market and forex


The differences in the trading alternatives available may be the single most dynamic difference between the two platforms. The forex market offers only a limited amount of options although there is more significant and numerous activities happening on the forex market in comparison to the stock exchange market. The stock market offers many different trading opportunities but it is pretty difficult for someone to make a significant amount trading on this platform without a lot of experience and luck. The stock market is less active than the forex and can hit a rut that will lead to shrinking in volume and activity on the market. Most and experienced forex traders focus on mainly seven currency pairs as all other pairings are what is called, cross currencies and is basically trading currencies of the same price.

The rules that govern both market platforms are another major difference between them. There are certain practices that are allowed in the forex trade that are encourage by this market but may not be allowed on the stock market. In fact, some of these practices may be acts of criminality that will be sure to get you incarcerated if practices. This includes short selling that is allow or may be even needed in the trading of currencies but is not allowed in the trading of shares and equity. This is the practice of selling borrowed securities or other securities that is not own by the sell on the notion that the price for them will drop, enabling them to buy them back for a lower price. This is a quick of making the seller a profit. This practice is not allowed on the stock market because off the rules involved.

The differences in the margins and leverage on the forex market due to the high liquidity of the platform cannot be accomplished by the stock market. This difference is not found on the stock market and ensures each stock trader needs a minimum of at least half the investment they have available in the margin accounts. Forex traders only need to have about one percent of theirs in their margin accounts. On the other hand, stock traders reap the benefits of higher commissions than those of the forex traders.

The markets have change over the years. In the past, stock brokers demanded not only a commission fee but they also asked for the fees involved with the trading and they took their spread. The forex market is different in this aspect as well. The brokers of the forex market only take their spread as fee for all and each trading. It is important that you know these small detail and differences between the two trading platforms, especially if you have interest and desire to trade on any of these platform. This will limited the mistakes you make including the ones that may be a breach of the law. With this understanding, you will have some knowledge of the practices of each platform and you won’t be easily swindled of scammed out of your hard earned money. It will also help you decide which platform is the best platform for you to do your trading. Trading may make you the type of money you want it to make you but it may also not make a dime for you. Research and practice is the best way to tackle either of these markets.