Forex Vs Stocks

Forex trading was always considered a traditional choice for day trading, while stocks are more suitable for long-term investments. Primarily, the stock market isn’t subject to rapid fluctuations as much as the Forex market is, and another thing is that Forex offers more flexibility. 

Yet, in the wake of the latest stock market developments, such as the GameStop phenomenon, many beginner traders started considering the stock market as a promising field for day trading. So, if you’re in for extensive Forex vs. stocks analysis – JustForex has got you covered. And if you’re up for the quick pros and cons – keep reading, and we’ll explain that to you in a few minutes.

Advantages and Disadvantages of Forex VS Stocks

One cannot say that the Forex market is “better” or “worse” than the stock market. They’re just different. Still, there are certain things to consider from the point of view of an independent trader, especially the one who’s focused on day trading and doesn’t have billions to spend. 

1. Forex offers way higher liquidity than the stock market. The reason for that is simple: people always need to exchange currency. Whichever pair you pick, there’s always someone who wants to exchange Swedish Krona for Dollars, Australian Dollars for Japanese Yen, etc. If you don’t trade blue chips on the stock market, it might be challenging to sell your assets when you need to because no one needs them.
2. There are more chances to make an impact on the stock market than on Forex. If you buy or sell a million worth of some small company’s shares – you’ll see consequences of it and might use them to your benefit. With Forex, if you’re not George Soros, or at least not as rich as he is – no one will ever notice you selling a million or two, even in an exotic currency.
3. Forex is open 24/5, with overlapping working hours of different forex exchanges being peaks of trading activity. Stock exchanges’ working hours overlap too, but not every company has its stocks listed on more than one exchange. You might get stuck with the working hours of one exchange, which is inconvenient for those who haven’t yet come to making trading their primary source of income. There’s another side to 24/5, though. Forex is constantly in motion, one person is unable to trace all the changes. One needs to sleep from time to time, and while you sleep – you might miss a significant trend and wake up to unpleasant news of a stop-loss triggered.
4. Due to the steadily rising popularity of the Forex market as a perfect field for day trading, brokers are forced to compete with each other, offering low to zero commission, and in many cases benefiting from the spread only. The stock market doesn’t provide such luxury, and commissions might be quite significant.
5. To determine your Forex trading strategy, you need to process way more information than if you’re trading stocks. The currency exchange rate depends on dozens of economic, political, social, and natural factors, while the stock’s price – only on the health of the company itself and the sector in general. Yet with Forex, there is a lower possibility of being played by the sharks of Wall Street because the currency exchange market is way harder to manipulate.

Now you don’t just know that Forex is better for day trading than stocks, but know precisely why it is so and can make an educated decision on whether you want to enter it or not. If you decide to join it – we wish you to achieve success!