4 Major Differences Between Forex and the Stock Market
The Forex Market Never Stops
The Forex market is open 24/7 and you can make transactions whenever you want. With stocks, you’ll have to look at closing and opening times. This comes with many implications.
This might seem like it’s a clear advantage for Forex traders, and it can be, but it means that you’ll need to be much more invested in your trades. You don't know what could happen while you’re sleeping, and one or a series of announcements could sway trades in one direction or the other.
This means that you don’t only need to closely monitor your trades; you also need to stay abreast of recent news. If you’re looking for a reliable source, you should check out a site like 100ForexBrokers. They have all the latest news, offer things like technical analysis on specific pairs, and a few trading guides as well.
The Forex market is also very liquid. Unless you’re trading in a very obscure currency that nobody wants, you should be able to find buyers. With stocks, it can take a lot of time before you can unload your stocks, especially if you deal with things like penny stocks.
Forex is Better for Short Term Trading
Making long-term predictions on the Forex market can be difficult, and even if you're correct, the returns will usually not be as big as with stocks. Not to mention that currencies do not pay dividends. With stocks, it's easier to predict the long-term trajectory by looking at historical data, management, debt, the health of the sector, future projects, etc.
So many things can affect the cost of a currency, and some of them are completely out of your control. Conflict may break out in a country, or a major pipeline project might be canceled because of protests, for instance. This is why Forex is usually better for short and medium-term trading.
Forex Trading has a Much Lower Barrier to Entry
One of the benefits of Forex trading is the low barrier to entry. You can start a Forex account with as little as $10. Some brokers don't even have a minimum deposit requirement. You'll have a hard time making money with such a small amount, however. You will need to start looking at things like leverage, which comes with many risks. Here, the best strategy would be to use as little leverage as you can while you try different approaches.
These are some of the biggest differences between the Forex market and stocks you should know about. Both have their pros and cons, so look into them in detail and pick the ones that fit your investing style the best.