There are some significant differences between forex and stock trading. Forex has become one of the most popular types of trading and investment.
You need to know the meaning of forex trading to be able to understand more. Forex (foreign exchange) itself is the trading of foreign currencies with the aim to get as many profits as possible.
In simple terms, forex trading is like buying a foreign currency and then storing that currency for a certain period of time and reselling it when the value of that currency increases or the exchange rate strengthens.
But the profits you obtain are generally small if you do it that way. To get maximum profits, traders must buy and sell forex online like stocks.
There are always risks that come with any kind of investment. As a trader or investor, you must know that with the higher profit, you will need to face the higher risks. To understand about those differences, you should read the explanation below.
Know the Differences between Forex and Stocks
Forex exchange is a trading activity of foreign currencies or exchanging foreign currencies for profit. Citing various sources, this understanding of forex trading can occur because of the need for the use of a foreign currency.
The currency exchange turned out to be profitable. The profits you will obtain is from the difference of the currency traded.
If you want to get bigger profits, you must analyse the condition of the forex market and various factors that can affect the value of currencies you trade.
Stocks and forex are types of liquid investments, but there are significant differences between these two. Here are the differences between forex and stock that you should understand.
The Differences that can be Seen from Forex and Stocks
1. Stocks have no 'leverage' option
In general, the notion of leverage is the use of borrowed funds to increase the return on an investment. In forex trading, investors can use the 'leverage' option with a certain ratio.
2. Trading hours
The trading hours in stock exchange are limited from morning to evening following the IDX trading schedule. While in forex trading, trading hours last for 24 hours.
3. Fundamental analysis
In the implementation, forex doesn’t require fundamental analysis, while stocks prioritize fundamental analysis that aims to make the purchased shares have a good foundation to continue rising.
4. Investment objectives
Investments are generally aimed at long-term profits. In forex, the currency values tend to fluctuate. This is why forex is more appropriate for trading rather than investing.
5. Traded goods
In forex, the goods traded are relatively small. The majority of forex traders only focus on the value of major currency pairs such as EUR/USD, USD/JPY, GBP/USD, USD/CAD, AUD/USD, and NZD/USD.
While stocks have a lot of merchandise or issuers. There are hundreds of issuers that can be bought and sold on the IDX. When combined with world stock exchanges, there are thousands of stocks that can be traded or invested.
6. The nature of the transaction
The final differences between forex and stock is the selling time. The nature of stock transactions can be said to be one-way. You buy an issuer at the opening of the exchange and sell it at the close of the exchange. The difference in price at closing can be a gain or a loss.
While in forex, transactions are two-way. You can buy it and then sell it in a short time, then buy it back after a while.
Before you trade forex, choose an official broker registered with the Commodity Futures Trading Regulatory Agency (CoFTRA). One of the brokers that you can choose is Didimax forex broker.
You can check the list of official brokers on CoFTRA's website. Although you can choose a foreign broker, for security it is better to use a domestic broker that is easy to track. After knowing the differences between forex and stock, you can choose which one you want to invest your money in.
