Difference between Forex and stock trading

Forex and stock markets are among the most popular trading markets, where millions of people earn and invest billions of dollars every day. At the first sight they seem similar, and they indeed share some of the characteristics. However, these two markets are essentially quite different. In this article, we will break down some of the most essential differences between them.

What brings these markets together

If you do not want to choose between trading on these two markets, there is a way to bring them together. Binary options trading allows you to trade both stocks and Forex, but it works differently from these two markets. Essentially, it is much simpler, and you do not trade stocks and currencies directly. Automated trading systems can trade both Forex and stocks when you connect them to the account you have with the broker – click here to get to know more about one of the best of them. Still, there are many differences between these two markets, and we will tell you more about them.

Hours of trading

First of all, if you want to trade either Forex or stocks, you should know that they operate on a schedule. Stock markets are open 8 hours a day, and the exact period depends on the country where the main market is located. When the period expires, the market is closed for trading and it opens at the same time the following day. Forex market is open 24 hours, but there are three different markets operating in periods of 8 hours: American, European and Asian.

The marketplace

shutterstock_16739725-1The marketplaces of Forex and stocks differ as well. Forex market is not geographically determined and they are not centralized. On the other hand, stock market depends on the geographical location of the physical headquarters. Stock market is located in the world’s largest stock markets such as New York Stock Exchange. What’s more, it is possible to trade at the very location by the outcry system, which is not possible with Forex trading.

Speed of trading

The trading speed also differs on these two markets. When you buy or sell currencies on the Forex market, the transaction is performed almost at the same moment. When the trading signal occurs, the trade is executed automatically. With stock trading, the trader needs to get the order to the trading floor, and it takes a few minutes before it is executed from there.

imagesDirect trading

Since Forex market is not centralized, it allows direct trading. This means that there is no mediator, but every trader can buy and sell currencies directly. On the other hand, when you want to trade stocks, there is always a middleman between the buyer and the seller. It goes both ways, so you will trade indirectly no matter if you buy or sell stocks.

Complexity

Both these markets are complex in their own way, but they require different analyses and approaches. There are only four main currencies on the Forex market, but this type of trading involves mastering many different strategies. On the other hand, stock market contains hundreds of different stocks, and you need to keep track of the companies that offer them, so you can determine their value and the changes to come.