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There are many reasons why it’s difficult to choose between the forex and the stock market. Both of them offer unique benefits and advantages to investors and investors. And with those advantages come the various risks and dangers associated with each market. It really takes guts to decide who should win in the forex vs. stock battle.
In this article, we will compare Brokerage Firm – Financial Institution these two markets and see what differences they have in order for us to decide better which market is better than the other. Read on!
Leverage
In stock trading, you can usually trade with a maximum of two to one leveraging. There are also some qualifying requirements before you can do such a thing. Not each and every investor is approved for a margin account, which is exactly what you need in order to leverage your trades in the stock market.
Financial Broker – Financial Expert Forex trading, on the other hand, is very different. To quality to trade while using leverage, you just have to open a forex trading account. There is no strict requirement. In the US, you are limited to only 50:1 leveraging. However, in other countries, you can leverage as much as 200:1.
Liquidity
When you are tradin stocks, you are basically buying shares of companies. Each stock can cost from a few dollars to hundreds of dollars. Market price differs with supply and demand. Trading on the forex market is quite different. Even if the supply of a country’s currency can fluctuate, there is always a huge amount of currency that’s available to trade. As a result, all major world currencies are highly liquid.
Paired Trades
In currency trading, currencies are always traded in pairs. That means ought not only to be concerned with the economic health of the country whose currency you are currently trading, but also the economic health of the country whose currency you are trading against.
The fundamental concerns you should have also will differ from one market to another. When you buy shares of Intel, your main concern is whether the stock will gain value. You will not be as concerned with the stock prices of other companies.
On the other hand, trading on the forex market means you have to consider the economics of two countries. In other words, a successful single trade on the forex market requires analysis of two different countries.
Freedom from regulation
Stock trading on major exchanges has many regulations and restrictions. Forex trading is less regulated. In some ways, the regulatory environment of the major stock exchanges imposes limits that you may not welcome. It also protects you and other investors to a degree the forex does not.
Market Accessibility
Currency markets sport greater accessibility than stock markets. Even if in the 21st century it’s possible to trade stocks twenty four hours a day, five days a week, it’s still not very easy. Most retail investors trade through a US brokerage that has one major trading period daily, with a much smaller “after hours” trading. It also comes with volatility and price issues that discourage many retail investors.
Meanwhile, forex trading can be performed six days a week, 24 hours a day. And since there are many forex exchanges from around the word, it’s always trading time somewhere around the world.
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