Forex vs Stocks - Which is more profitable?

As the two most popular global markets, you’ll often hear about forex versus stocks trading. While comparable, forex and stocks do differ and one may suit your trading style much more than the other. You could very well choose to start trading in both forex and stock markets.To get more news about forex vs. stock, you can visit wikifx.com official website.

Forex versus stocks is a question of personal preference. While the primary reason influencing whether the market you chose to trade should be the interest you have in that particular asset, be it currencies in the forex market or company shares in the stock market, there are many other factors that may affect your decision. So let’s have a closer look at money trading on forex and stock markets.
What is forex versus stocks?
So what is the difference between forex versus stocks? The very first difference is quite obvious – what you are trading! Forex, short for Foreign Exchange, is the largest global marketplace with a daily average turnover of forex trades of $6 trillion. The forex market is the conversion of one currency into that of another on the currency market. For example, when trading forex, forex traders buy a foreign currency on to use overseas while on holiday or to trade a GBP/USD currency pair.

The stock market, however, is where a stock trader is involved in the buying and selling of ownership in a company and is a significantly smaller market in terms of value. Currently the value of stock trading runs at roughly $200 billion per day. The units of measurement for ownership are known as shares and you can start trading stocks on places like the New York Stock Exchange.
Why trade forex versus stocks?
Once you learn how to trade forex and penny stocks, you can choose which to trade. There are a few different factors affecting why you should trade Forex over penny stocks or vice-versa. There are different factors affecting why you can trade USD/JPY or trade GBP/USD more often with firms that offer forex trading on major currencies than companies listed on the London Stock Exchange.

Market trading hours
The forex market is a truly global marketplace as it is accessible from anywhere in the world and trading on major currencies is available 24 hours a day, 5 days a week. Day trading can occur over several time zones, meaning when one zone closes another will be open. For example, when trading during London hours closes, the marketplace in Sydney will be in full flight. Marketplace zones can overlap too, resulting in a highly active foreign exchange for forex traders, such as when London and New York trading hours overlap around 08.00am (NY time).

The stock market has a significant limitation on trading time. Companies are listed on specific stock exchanges, so stock traders can only trade certain penny stocks within the designated hours of that exchange. This means that stock traders can only trade on a single exchange for 8 hours a day. While you can trade EUR/USD all day, the same cannot be said if you want to buy Apple stock.

Volume
You surely haven’t missed the trading volume difference – $6 trillion vs $200 billion. When it comes to sheer market volume there is no competition between forex vs stocks. That high trading volume does come with some pretty big advantages. High volume on the largest financial market typically means orders are executed much easier than stocks and at a price closer to what the trader wants.

Liquidity
High volume also typically means high liquidity. With high liquidity also comes tighter spreads with much lower transaction prices. Therefore forex spreads are much lower than stocks meaning the difference between the bid and ask price is much closer.

While the forex market is considered to have high liquidly overall due to such an active 24/5 market, the stock market is not so straightforward. Liquidity in the stock market can vary greatly between individual stocks – A particular stock that does not have sufficient volume will have low liquidity as it cannot be bought and sold as easily as a stock trading at large volumes.
Forex versus stocks day trading
To begin, it cannot be understated that to properly day trade in the stock market, you’re going to require some significant capital for all of the different stocks and commodities trading opportunities. To be a “pattern day trader”, that is to execute more than 4 trades per business week, you’ll need $25,000 starting capital.

If you are unable to muster the capital required or you cannot manage to be available during the specific stock market trading hours, then FX trading may be the better option for electronic trading. Key differences include the fact that forex day trading exists 24 hours a day, 5 days a week without specific trading sessions. You can trade on future price movements on one currency or currency pair whenever you want, rather than the specific 8-hour window of trading sessions offered by stock exchanges.

Forex day trading also requires most forex brokers to have a lot less capital than stock market trading. Many forex traders begin their day trading prospects on the FX market with as little as $100 and capital of only $500 still allows for a great amount of flexibility when trading.