What Are The Differences Between Stock and Forex Trading

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What Are The Differences Between Stock and Forex Trading?
When learning about the world of trading, beginners can often conflate Stock trading with Forex trading. While at the surface, both of these trading markets have a high trading volume and are extremely liquid, but when you delve deeper, the technical nuances of these financial domains are quite distinct.

Forex trading deals with the exchange of currency, while Stock trading deals with the shares of companies. For starters, the ease of accessing these markets is considerably higher when considering Forex. Beginner traders can log onto forex markets at any time of the day, without any prior experience, and quickly learn the tricks of the trade.

Before settling on a financial domain to work in, it is important to evaluate what both these trading markets offer. To help you in this pursuit, we have highlighted the important differences between Stock and Forex Trading.
Entry Barriers
When the entry into these trading realms is compared, then a major difference can be identified. Stock markets deal with the acquisition and selling of companies’ shares, it requires a technical understanding of how the commercial sector works, and the factors that influence business decisions. An eminent stock trader has to consider the far-reaching impacts of mergers, global commercial deals, a new economic trend, and personalized information of commodities to evaluate whether a stock will give them a profit or loss.

On the other hand, a forex trader requires only a basic knowledge of how foreign exchange, specifically that of currencies work, in order to start Forex trading. Therefore, Stock Trading places an entry barrier in the form of nuanced financial knowledge on beginner traders.
Trading Volume
The global Forex Market clocks at a staggering amount of $5.1 trillion each day, making it the most liquid market. On the other hand, the stock market has a daily trade volume of around $200 billion. This does not mean that Forex trading is easier, rather it shows that foreign currency exchange has a greater opportunity to earn.

The trading volume also signifies the amount of leverage present in the world of forex. Leverage or margin trading is used to increase the amount of returns while keeping the initial investment less. Beginners can practice to trade with high leverage broker in order to reap higher dividends.
Liquidity
Due to significantly higher trade volumes, Forex markets are more liquid than stock markets. In a nutshell, liquidity means the availability of assets in a market. The reason behind this fact is the nature of the commodity being traded. Currencies are considered to be much more liquid because they have a global demand that can never be satiated. On the other hand, the same cannot be said about stocks because they relate to the shares of a company.
Market Operations

Due to the global demand for currency, forex trading markets operate 24 hours, for 5 days a week. Traders can use their brokers’ or digital applications to log into the markets within this window to place a position they deem fit. On the other hand, the stock market usually operates for 8 hours a day and is closed on the weekends. This time frame seems pretty intuitive as well since companies usually operate on an 8-hour window, and their shares can only be influenced by this time. 

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