Whether you are the new kid on the block who is just starting with online trading or a seasoned trader who has invested in pretty much anything, you’ll probably want to know which market is better to trade – Forex vs Stocks. Despite being interconnected, these two markets are quite different.
When it comes to forex vs stocks trading, you want to realize that each one of these platforms focuses on a specific niche. For example, if you’re a short term trader who appreciates quick profits and is not willing to risk huge, then Forex is your best choice. Conversely, if you are a buy-and-hold investor who is keen on risking more money for bigger rewards, then stocks might be your choice.
Forex vs Stocks – A Comparison
Basically, with Forex, you can choose to trade one of the main pairs of currencies. While there are dozens of currency pairs you can trade, most people choose to trade one of the seven most prominent pairs, which usually involve EUR/USD, AUD/USD, USD/JPY, USD/CNY, USD/CAD, EUR/GBP and USD/GBP.
On the other hand, the stock market includes over 2,800 stocks listed in the New York Exchange, plus another 3,000 listed on NASDAQ.
When it comes to day trading forex vs stocks, you definitely want to choose the former. As a day trader, the Forex market is more liquid and comes with 24-hour trading period. Conversely, the stock market is only open for 8 hours a day.
Another difference between forex vs penny stocks is that Forex comes with a narrow focus, while the stock market has a wide focus. This means that, once you get specialized in Forex and you’re starting to use the best Forex tools out there (note: link to some of the tools you’ve reviewed so far), you’ll be able to dramatically boost your profits.
Forex pairs come with low spreads. Granted, the profit is smaller, but it amounts in time. You can invest very low amounts in Forex and still make a profit while investing in stocks requires a whole lot of money.
Forex vs Stocks: Which is better?
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So which one is better for you? Is it Forex or stocks? After taking a deeper look into all the aspects that differentiate stocks and Forex, we can only reach one obvious conclusion: Forex is in 99% of cases a better choice than stocks.
Let’s explore together some of the main benefits of the Forex market over the stocks market:
1. 24-Hour Availability: as revealed above, when it comes to forex vs stocks day trading, you can trade Forex all day long. Not the same can be said about stocks, which have a limited window of just 8 hours. Most brokers on the Forex market are open Monday to Friday, 24/7, while the stock market is only open for 8 hours.
Note that if you are from Europe and you want to trade in the US stock market, you’ll probably spend a lot of evenings at your home. However, you can seamlessly trade in the Forex market all week long, from the comfort of your home.
2. Low Commissions: most brokers out there allow you to trade on the Forex platform without any commissions whatsoever or very low commissions. If you’re wondering in the battle between forex vs stocks which is more profitable, you can know for sure that Forex is the best one.
When trading stocks, you need to pay the spread, in addition to a hefty commission to the broker. The Forex spreads are super transparent, and this platform is overall more affordable than its counterpart.
3. Extremely Liquid: liquidity is a very important factor, especially when it comes to getting profitable trades. A market like Forex which comes with high-volume trading is highly liquid, offering lower spreads and better transaction costs.
The stock market, in turn, is less liquid. Only certain stocks are extremely liquid, having a share volume of over 200,000 units a day. These are the stocks from companies like At & T, General Electric, Vodafone, Verizon, Google, Intel, Amazon and Bank of America. However, that’s only a dozen companies out of tens of thousands of companies.
Trading Forex allows you to quickly convert your digital assets into cash, 24/7. Not the same can be said about the stock market, which is less liquid. So Forex is definitely the winner here.
4. Perfect for Beginners: when it comes to forex vs stocks for beginners, Forex definitely has an edge. Pretty much anyone can start trading on Forex without previous experience. With a few Forex signal trading tools by your hand such as the 1000 Pip Climber System and an experienced broker helping you out, you’ll never get stuck when trading.
On Forex, you can also leverage the benefits of compound interest. Basically,
you can let your money work for you. You can start at around $1,000 and with a win rate of 55%. You can also get a Reward:Risk ratio of 2. If you’ll do some math, you’ll notice that you can get an expected outcome of 1.3% in the long run. That means you’ll make $13 per trade for your $1,000 invested.
After several trades and a few weeks spent trading, you’ll be able to reach $1,100. If you have $10k instead, you’ll reach $11k, which is another story altogether. As you can notice, Forex is the perfect place to learn how to trade, especially if you have a good analyst by your side who can help you to properly understand the market.
Conclusion
In a direct fight between forex vs stocks, it seems that the latter has to quit sooner than expected. Forex beats stocks to a pulp in most areas, being a much better choice for beginners who are just starting out with trading or for experienced traders who tend to choose small wins over risky, larger wins.
Forex comes with 24-hour trading, minimal or low commissions, huge liquidity, short-selling prices, compound interest benefits and quite a narrow focus. Choose Forex and take your wins to a whole new level.