The Forex Trader vs Stock Trader and Their Differences

Queconomics – The forex trader vs stock trader is a common comparison that you can find in the forex industry. Usually, that is done to decide which market is the best as an investment.

Both of them are related between one and another, but they are also really different. Forex has the unique character that differs it with the others that you can find at the moment.

For some people, it is more interesting to trade on that. That is why; it is important to know the differences between those circumstances. Here are the lists of that topic.

Forex Trader vs Stock Trader Based on the Volume

One of the biggest differences is about how huge it was. The forex market is so big and in a day it can reach up to $5 trillion. Almost all trades are concentrated in several currency pairs.

Those are like the USD/JPY, AUD/USD, GBP/USD, and the EUR/USD. That volume make the dollar volume is so small from the combinations of the whole stock market in the world.

In average, they just get almost $200 billion per day. With that huge amount of trading, there are several benefits that you can get. The high volume means that it is easier to enter the trade.

It is also easier to get close to the price that they want to have. Meanwhile, the whole market’s are prone to gaps and have more liquidity in every price points which become the compliment.

Liquidity and the Daily Activities

Learning about the forex trader vs stock trader can be also seen from the liquidity aspect. The high volume is commonly having the high liquidity as well. Liquidity creates a tighter spread.

The transaction cost is also lower. The currency pair has the really low spread and transaction cost. It is if you compare it with the stock. That becomes one of the interesting points from the Industry.

Furthermore, foreign exchange is over-the-counter which means it is not transacted through the traditional stock exchange. The trading is facilitated through the cross bank market.

It means that trading can be done in all over the world during the business hours and the different country session. That is why; the forex trader has 24 hours access every day.

Usually, that is done in 5 days in a week. Elsewhere, the stock index is traded in the different time and affected by the different variable as well.

Minimum or Even No Commission at All

Most of the foreign exchange brokers don’t charge any commission. In the other side, they always make the margin in the spread which becomes the different between the selling and buying price.

When trading the equity (stock), futures, or the major index such as S&P 500, you must pay the spread and commission the broker. That is a different between the forex trader vs stock trader too.

Spread in forex is quite transparent than the other contract fees. You can see the spread got the EUR/USD pair which is highlighted in a transaction value that can be executed.

That spread can be used to count the amount of your position cost. It is especially at the beginning situation before It is executed.

The Tight and Wide Focus

There are 8 major currencies that can be the focus of the people. Meanwhile, the stock world has the thousands of futures to trade. With only 8 economies focused on Forex, there is a point.

Usually, people will find the divergence and convergence trend between the currencies to customize the currency pairs that will be traded. It is easier to be checked and maintained.

The variable which affects the main currency can be easily maintained by using the economy calendar. Basically, those things are the reasons why the forex trader vs stock trader is different.