Forex and the stock market are closely related sectors of the exchange, between which there are significant differences. Each of them is attractive in its own way for those who want to have income from trading.
The stock market is mainly traded in securities - shares of companies. Buying them, a person becomes a co-owner of the organization that issued shares and thus receives part of its profits. Stock exchanges appeared a long time ago, it is generally accepted that the first of them opened in 1409 in the territory of modern Belgium.
Currency trading has acquired a large scale relatively recently. Now it is becoming more and more accessible to everyone who wants to. And its volumes significantly exceed the volume of stock trading.
STRATEGY
The general trading principle is the same in both cases and is easy to understand. Supply and demand form the current price. It grows when there are more people willing to buy and falls when there are more people willing to sell.
However, the price of a currency is most susceptible to small fluctuations, even if there is a pronounced trend. The reason is that currency pairs are more often traded for quick profits - a common occurrence when the range between opening and closing a trade is only a few moments. And this is how almost everyone behaves: both small traders and the largest banks.
Stocks can also be bought and sold in a short time, but in most cases, money is invested in them for a long period. These are investments in the real sector of the economy associated with production, mining, and services.
This is the essence of the strategic differences. The Forex market is based on speculation, price changes. In the stock market, investments are made in the economy with its material values: factories, mines, transport, communications, etc.
OTHER IMPORTANT DIFFERENCES
Currency price movements are more active. First of all, due to the large volumes of trade. On a pair of EURO / DOLLAR, they earn incomparably more than on shares of a conventional shoe company. As a rule, share prices are passive and change significantly during the reporting period and other really significant events.
Major currency pairs can be traded around the clock on weekdays, due to the fact that the European, American and Asian trading sessions replace each other. Shares are most often represented on the stock exchanges of a particular country, which have their own opening and closing hours. Those who wish to buy and sell are limited in time. Although large companies are still listed on different exchanges on both sides of the ocean.
On Forex, brokers easily provide traders with a leverage of 1: 100 or more up to 1: 1000. In the stock market, the actual leverage limit is 1:10.
There is a significant difference in the choice of assets. There are a huge number of enterprises all over the world, and their shares too. But most of them are not liquid enough to speak of substantial earnings. There are much fewer assets on Forex. For example, brokers in most cases offer clients a choice of several dozen currency pairs.
Forex is especially different from the stock exchange in the level of control and regulation. The world currency market does not have any center, and work on the stock exchange is more strongly regulated at the level of various states.