I have been often told by friends that STOCK trading is way better than FOREX trading and it has better prospects in the long run. Today, I would like to draw out the advantages and disadvantages of both the world in order to get a better idea for myself along with other community members. I wouldn't go much into the history and definition as most community members are pretty much aware of them.
My sole objective would be to point out the difference to grasp a proper knowledge and base our future trading decisions.

LIQUIDITY FACTOR

Forex market is considered as the most liquid market with a trading volume crossing over $ 5.3 trillion per day back in 2013. This is a massive figure and way more than the combined figure of all stock markets.



Each month, Thompson Reuters Index tells us the combined average daily volume of all spot, forwards, swaps, options and non deliverable forwards.

The above charts clearly depicts how often Forex is traded over Stocks.

EASE OF TRADING

New York Stock Exchange has over 4500 stocks listed and NASDAQ has close 3500 stocks. Apart from them, we have Tokyo, London and other stock exchange as well. If we combine the US, European and Asian stock markets we have close to 40 industries. In Currency trading we have handful of pairs out of which most smart traders monitor 3 to 4 pairs and trade them frequently. I believe it is much easier to track a couple instead of going through thousands of stocks.

Even in bull market, your stock may go down if it is not the right and best stock in its peer group.
We often notice at least I personally have experienced that stocks went down even when that sector rises. So, we have to be very lucky at our picks.

The currency market has fewer options and the bulk of trading revolves around US Dollar and Euro. (up to 70 percent of the total combined daily traded volume)

LEVERAGE

leverage is basically the amount of trading money that the broker offers for your own money. Forex brokers offer up to 900 times of your investment. This is possible because of the higher liquidity levels within the markets. We can open Forex accounts and trade with 0.5 % margin or open a $50 account and control a 10,000 unit currency position. Stock traders generally need to safeguard 50% margin.

COMMISSION

Most stock brokers charge commission. Commission is the payment that you pay to your broker for placing an order. Currency market brokers has the option of no to low commission. They compensate their services through the bid/ask spread.

MARKET HOURS

The major stock markets are open during US business hours. Well we do have other industries but how many of us follow them? Not many of course.
With Forex we have the ability to place trade anytime during the day. The market opens from Sunday at 2 PM EST until Friday 4 PM EST.

SHORT SELLING

There is no structural bias in currency market. We can sell pairs without any restrictions at any point of time. It doesn't matter if the market is falling or rising.
However, Stock markets do have restrictions on short selling. The U.S. Securities and Exchange Commission has issued a rule to restrict short selling under certain circumstances. Under the alternative uptick rule, trading halts when the market price of a security declines 10 percent in one day.



















EXECUTION AND MIDDLEMAN

Forex markets have no centralized exchange location so trades are placed directly from the institutions. quotes are often placed instantly and usually vary from different currency dealers. This allows us to get the best deals and pick the best one as per our trading style.

On the other hand, Stock markets have a centralized exchange location and with most online stock trades the price that you think you’re getting is not what usually ends up on your order.

Thus stock markets have a much more limited trading window and have a higher chance for delays in execution, slippage and price manipulation.
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