Forex Trading Versus Stock Trading
It is important for a trader to have a clear insight on the difference between forex and stock trading even though both are a part of the financial market.
Forex trading refers to the buying and selling of international currencies, whereas stock trading deals with the trading of stocks or shares of the companies listed on the Initial Public Offering.
If you are intending to trade and are confused between forex and stock trading, here is the analysis that can help you make your decision.
Forex v/s Stock trading:
Factors affecting price of trading: In forex trading the price value of any currency is affected by economical conditions of a country like GDP, inflation, import & export, geopolitical stability, and internal political stability.
In stock trading the prices of shares are affected by the financial performance of the company, expansion plans, and broad economic trends.
Liquidity: Liquidity refers to the ease with which you can find your buyer or seller. Liquidity depends on the trading volume of the market. Higher the trading volume, higher is the liquidity.
The trading volume of the forex market is more than the stock market. This means that the forex offers more liquidity than the stocks.
Volatility: Volatility refers to the rate at which the price changes in a certain period of time. Volatility in the forex market is higher than the stock market. Though high volatility makes it difficult to anticipate the future price movement but also offers many trading opportunities.
Leverage: Leverage allows traders to trade for relatively larger positions with limited capital. Both forex and stock offer leverage but forex offers significantly higher leverage than stocks.
Consider the above points before you choose on which market you are willing to focus on.
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