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Forex versus stock market

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There are so many trading instruments from Stocks, futures, forex markets, ETFs etc. Deciding which of these markets to trade should be based on investor’s risk tolerance and trading style. This topic will show you some differences between stock market and Forex market.

Number of trading Instruments


Of course, stock market has more stocks than FX market. There are more 2800 stocks listed on the New York Stock exchange and approximately 3100 are listed on the NASDAQ. In Forex market, there are dozens of currencies traded. The majority or currencies are EUR/USD, GBP/USD, USD/JPY, USD/CHF. And the commodity currencies are AUD/USD, NZD/USD, USD/CAD. Hence, it is easier to keep an eye one some currencies rather than thousands of stocks.

Trading hours


Trading hours for stocks are limited to trade, generally 9:30 am to 4pm Eastern Standard Time. On the other hand, the Forex market is a 24- hour market. Opening in Sydney, then traveling around the world to Tokyo, London and New York. In addition, customer service is avaiable 24/7. With this flexibility, you can choose your own suitable time to trade.

Liquidity


On average, the forex market transacts more 4000 trillion dollars of volume perday. Then the forex market is so high liquid, it is easily for you to open and close your positions whenever you want. On the other hand, if the stock markets hit a lulllull, resulting in shrinking volumes and activity, it may be hard to open and close positions.

Short selling and Leverage


Due to the high liquidity of the forex market, margins are low and leverage is high. In the US, investors generally have access to 2: 1 leverage for stocks. The forex market offers a higher leverage 50: 1, 200: 1 even 400: 1. It is not possible to find such low margin rates in stock market. In addition, the forex market is free for short selling, It offers the opportunity to profit in both rising and declining markets. On the other hand, it is difficult to short sell in stock markets because of strict rules and regulations.