The stock market and the foreign exchange (forex) market are two very famous things in the investment world.
Investments in both markets are considered lucrative and quite profitable. However, it is important to know that the risks of both products are also very high.
In addition, it is also necessary to know that the stock market and forex are two different products. Both have significant comparisons.
So, what’s the difference?
Difference between Stock Market and Forex
Quoting from Investopedia, forex is the largest financial market in the world, with an average trading value of more than 6.6 trillion US dollars per day in 2019. So it’s no wonder, if a lot of rumors develop in this business.
Many people are attracted to this foreign exchange market because of its large liquidity, trading time, and the amount of leverage received.
But here we have attached 3 differences from the stock market and foreign exchange (forex) that you need to know:
1. Instruments Traded
In the stock market, the instruments traded are proof of ownership of a company or limited liability company.
While in forex, the instruments traded are foreign currencies from all countries in the world.
Unlike forex trading, which equates the value of a country’s currency with another country’s currency, in stock trading, the value of an industry’s stock is not compared to other industry stocks.
2. Liquidity
It is well known that the liquidity of the forex market can be an attraction for investors. This market is highly liquid compared to others due to its large capitalization.
On the other hand, liquidity in the stock market depends on the popularity and capitalization of the stock being purchased.
3. Volatility
This indicator is useful for measuring short-term prices. Some traders may opt for short-termism and depend on volatility to benefit from rapid price changes in the market.
Others may prefer investments that are less “volatile and less risky”. Volatility in the forex market is very high, meaning that prices can rise very quickly and vice versa.
Meanwhile, patterns in stock prices tend to be more normal and can be tracked over time. As such, many short-term traders prefer the forex market. Meanwhile, long-term investors may prefer the stability offered by blue chips stocks.
Those are some of the differences that exist in stocks and forex, you can understand and practice it slowly.