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Forex vs Stocks: Which Is the Better Option?

Posted by : Premraj | Posted on : Wednesday, October 25, 2017

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In today’s world of investors and active traders, access to an astonishing array of trading platforms has made for a marketplace which at first glance can seem hopelessly chaotic. For those who are relatively new to the investing game, it can be hard to know where to begin: should you invest in Forex or in stocks? Do you know what the difference between them is?

In this article, we will look at the differences between these types of investment and give you the information you need to decide whether either is suitable for you.

What’s the Difference?

The mechanics that underlie both Forex and the stock market are very similar, as price fluctuations mean that investment values rise and fall. In both cases, the goal is to trade when prices are low, to make a return when the price rises.

The biggest difference between the two is where they are traded. Stocks are traded on specialized exchanges, such as the London Stock Exchange and the New York Stock Exchange whereas forex trades are conducted ‘over the counter’ directly between financial institutions.

Another major difference between the two is that forex trades can be made at any time of day. Stocks, on the other hand, can only be traded when the markets themselves are open.

If you would like to know more about how each market works individually then check out the guides available on https://investingoal.com/.

Which is Cheaper?

The nature of investing has changed a lot over the last few decades. The mobile revolution has bought investment opportunities to mobile devices and the financial barriers to investing have shrunk dramatically. For traders looking for the cheapest and most accessible investment option, Forex wins hands down.

Forex trades generally don’t charge a commission fee, which reflects the market’s size and the fierce competition that exists between traders. By contrast, investing in the stock market usually requires significant financial capital upfront.

The increased accessibility of Forex compared to the traditional stock market is believed to be a significant factor in its popularity. The lower initial barriers to entry, coupled with few to no transaction fees, means that a trader can begin trading with much less capital while still producing tangible profits.

Volatility

When we refer to the volatility of a market we are referring to the dramatic nature of the short-term fluctuations that occur. A more volatile market experiences much greater shocks on a regular basis. Forex markets tend to be more volatile. This allows for so-called day trading whereby investors buy socks with a view to selling them for a small profit the next day. The idea is that multiple low-value trades will add up to something significant.

Central Banks

Central banks, the national bank of their respective country, can have a dramatic influence on the stock market, both directly and indirectly. Forex markets seem to be generally more susceptible to the shocks that sometimes emanate from these central institutions.

Both Forex and the stock markets offer different things to investors. For those who are new to the game and don’t have the necessary financial backing, the Forex market is more accessible and better suited to short-term investing whereas the stock markets are better suited for the long game played by more experienced players. Both offer the chance to make big returns though.

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