The main objective of both stock trading and forex trading is to generate profits. In fx trading you buy or sell different currencies in the international currency market. Stock trading involves trading in stocks listed with the exchange of a particular country.
There are many advantages of forex trading which offers greater flexibility and returns to investors. Some of the main advantages are:
o 24 hour trading
Forex Market or Foreign exchange trading begins from 5pm EST Sunday and lasts upto 4pm EST Friday. This allows traders to choose any forex trading times during the 24 hours of the day. Stock trading is regulated by exchange houses which stipulate the terms and conditions of operation.
o Brokerage / commission
In forex trading you only pay your broker the difference between the Asking and the Bid prices. In stock trade brokers normally charge a commission on each trade transaction that they execute on your behalf. Therefore compared to forex trading you pay your broker much more for stock trading. Brokerage charged for online stock trading is much less compared to manual trading.
o Number of stocks/ currencies available for trade
In the NASDAQ and New York Stock Exchange alone over 8,000 stocks can be traded. As against this the number of currencies that can be traded in the Forex market is much less. In fact there the most traded currency pairs normally are EUR/USD, GBP/USD, USD/JPY, AUD/USD.
o Margin
Margin limits are always set for forex traders. This ensures that you don't lose more than the balance in your trading account at any time. You will also be able to ascertain your liability well in advance. Not all stock brokers insist on margins. Without margin requirement stock transactions can even wipe out your entire savings if you are not careful.
o Liquidity
In forex trading whatever is brought or sold is highly liquid. The currency you buy or sell can immediately be converted back into cash or exchanged for any other currency. On the other hand in stock trading, the seller has to give delivery of the specific stocks traded for the ownership to pass on from the seller to the buyer. The buyer too has to pay for the stocks purchases. This entire process takes time and is not instantaneous in most countries.
Forex market trading is no longer the domain of large institutions alone. Ordinary people like you and me can easily learn the basics of forex trading education and start trading profitably in the market.
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