Stock market vs Forex trading

Stock market vs Forex trading

Stock Market or share market is much popular trading alternative than Forex trading.

Forex trading is riskier than stock market in long run.

However in individual transactions, a derivative transaction in stock market can generate more losses.

Before comparing stock markets with Forex market, lets us understand both markets.

Stock Market and different trading, investment options

In stock market shares of listed companies are traded.

An investor can either trade in shares or invest in share.

Biggest difference between stock market and Forex market is that in stock market you can invest in shares for a very long period.

In stock market you can:

  1. Trade in shares (same day buying and selling of shares)
  2. Trade in stock options
  3. Trade in future contracts
  4. Invest for long term

You can hold a share for long time. You can buy shares and keep them for very long time.

A share is a right in ownership of a company, by buying shares you are actually owning a part of ownership in company.

Forex Market and trading options

In Forex market you can trade in different currency pairs.

Tenure of a transaction will be for a very limited time. You cannot hold your contracts for a long time.

People also use Forex markets to hedge their foreign receivables and payable.

Differences between Share Market and Forex Market

Main difference between both is risk. Stock market is actually more riskier and quantum of losses can be multiple times of Forex losses.

List of difference between Share market and Forex market

  1. Forex markets have more liquidity than stock market
  2. Forex market in your country may provide limited currency pairs, you will have more options to invest in stock market, normally you will find multiple shares listed on your stock exchange.
  3. You can invest in share market but you can trade or hedge in forex market.
  4. Forex market is always active regardless of economic condition, stock market may behave rigidly depending on economic conditions.
  5. Forex and Stock market both have different tax treatments in different countries. For example, in India stock market tradings are considered as business activities and forex transactions are considered as income from speculation activities.

Similarity between Stock Market and Forex Market

Stock market and forex markets also have similarities.

Here are common features of both markets.

  1. Stock market and forex market, both are risky to trade.
  2. Both require a certain level of trading knowledge.
  3. Both can give huge loss and huge profit.
  4. Both can be traded online.

Whether you trade in forex or stocks, both require certain level of caution and risk appetite. If you are an active trader, you can share your tips and experience with us.

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