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The forex and the stock market are two very different financial markets. Traders and investors often differ in opinions as to which market is better for them to profit consistently. In this article, we’re going to discuss why the forex market might be the better of the two. Check out the reasons and decide for yourself which is better. You be the judge.
Leverage
In the stock market, you can typically trade with a 2:1 leverage, which is the maximum leverage you can take.
You also have to qualify to some requirements before you can start using leverage on your stock trades. Not all investors get an approved margin account, which is the most necessary requirement if you want to trade with leverage in the stock market.
On the flip side, the forex market is very lax when it comes to the use of leverage. You simply need to open a forex trading account.
You don’t need to meet any qualifying requirements. In the US, your limit is 50:1 leverage. That can be as high as 200:1 leverage if you trade in other countries.
Liquidity is Better
Trading stocks means you are buying the shares of a company. And companies’ shares can easily cost as much as a hundred dollars. At the same time, prices in the market move depending on supply and demand.
On the other hand, trading in the forex market is a very different world. Even though the supply of a country’s currency can fluctuate, you can expect that there will always be a large amount of currency available for trading.
In other words, or perhaps as a result, all the major currencies benefit from high liquidity.
Currency Pairs
In the world of forex trading, you always trade currencies in pairs. That means you must not only be aware of the current economic status of the base currency’s country. You must also research the economic health of the second currency in the currency pair.
At the same time, the fundamentals vary from one market to another. When trading in the stock market, you are buying stocks from companies.
You have to consider whether the company’s stock is set for appreciation or not. Meanwhile, when you’re buying or selling in the forex market, you have to consider two countries.
You of course need to ask questions over the political prospects of the country, its economic growth trajectory, et cetera.
Market Access
The forex market is comparatively easier to access than the stock market. Even though you can possibly trade stocks 24 hours a day, five days a week, it’s not easy to actually do that.
Most retail stock investors using a brokerage have access to only one trading period daily. On the other hand, forex trading can be done 24 hours a day, six days a week.
There are many forex exchanges all over the world. That means there’s always a trading session ongoing in one time zone or another.
