Understanding the differences between forex and stoke exchange will help you decide the right market to enter. Obviously, forex trading has several advantages over stock trading and is ideal for beginners and small individual investors. Let’s look at the comparisons between these two.
- Market size and liquidity
The Forex market is the largest market in the world. With daily transactions of more than 4 trillion dollars, it exceeds the stock market. Although there are thousands of different stocks on the stock markets, there are only a few currency pairs on the forex market. Therefore, forex trading is less subject to price manipulation by the main players than stock trading.
The huge market volume also means that currency pairs benefit from greater liquidity than stocks. A forex trader can enter and exit the market easily. Comparatively, stocks are less liquid; a trader may find it difficult to exit the market, especially during key bad news. It’s worse, especially for small cap stocks. Also due to their huge liquidity in the foreign exchange market, forex traders can benefit from a better price spread compared to stock traders.
- 24 hours open market
Forex trading can be done at any time of the day; the foreign exchange market is open 24 hours a day. This is considered a huge advantage for small individual investors who are just starting to trade Forex in their spare time. This allows forex traders to manipulate their programming around their trading opportunities; they can plan their forex trading when it suits them.
Based on the above few comparisons, forex trading is a clear winner for beginners.