Differences Between Stocks and Forex

Forex - Nov. 4, 2012

Many people are always looking for a way to invest their money and generate wealth. One popular way to do this is through the stock market. However, forex trading has become a popular choice for thousands of people all over the world. It is important for traders to understand the differences between stocks and forex before they make any financial decisions on how to invest their money online. All markets will share correlations and it is never good to disregard any similarities, however, it is also just as important to note the differences. Many people who are unfamiliar with forex will think it is just like the stock market, but there are some major differences between the two that must be understood.

With stocks, the buyers will have to find sellers and sellers will have to find buyers. Stocks have lower liquidity than forex. Another difference is that forex is traded internationally and completely around the globe. Traders who are located in India will receive the same quotes as a trader in Canada. However, due to the various locations of the stock exchanges, share prices may differ from one exchange to another.

Another difference is that while traders on the stock market will work on the idea that they should buy cheap and sell high, Forex traders will make money when currency values rise or fall. Currency traders will also use leverage, which is not available when trading stocks. Finally, the forex market never sleeps. This means that trades can be conducted around the clock, where as the stock market has a specific closing tome each day, limiting the amount of activity. Overall, forex offers much more flexibility, which is why it has become a major investment choice for people around the globe.

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