The forex (foreign exchange) market may seem quite similar to other financial markets. But some differences set forex markets apart from others, say stock market. Forex trading is usually preferred to stock trading because of the following reasons.
1. The Trading Hours
Both the forex and stock trading work on a very strict schedule. Most stock markets work for 8 hours a day and then close till the next day. For instance, Australian Stock Exchange (ASX) operates from 8 a.m. to 9.30 p.m. Sydney Time.
On the other hand, forex trade has no downtime. The forex trading takes place for 24 hours a day, occurring in 3 shifts. You have a wide array of choices, from the Asian forex trading hours to European and US forex trading hours. Though they overlap, they facilitate trading day and night.
2. The Financial Friction
There is always financial friction when it comes to stock markets due to the involvement of middlemen. To facilitate trading between the seller and the buyer the middlemen (brokers) handle the services and goods leading to additional costs.
In forex trading, no broker links the seller to the buyer; as a result, the buyer does not incur additional financial constraints. You can be able to carry out spot trade in stock trading; therefore, you do not have to bear the fee charged by middlemen.
3. Geographical Considerations
Forex trading is not tied down to specific geographical locations. It can be carried out on a marketplace best situated regarding the demand for the product or service in question. The traders are in a position to decide on the location that is convenient to them.
Unlike, stock trading can only be located in a specific place where the trades exit and enter the market such as in the New York Stock Exchange (NYSE). Centralization of the trading marketplace strains the trader's ability to decide on the locations that best suit them.
4. The Period of Trade Execution
Forex trading has programs that allow the trader to execute the trade in question. This service enables the trader to carry out the trade almost instantaneously; making a trader less likely to miss out on an important trade.
In Stock trading, the trader has to take the trade to the floor which will take several minutes for it to be executed.
Therefore, you should understand that foreign exchange as well as stock exchange has their risks require sufficient learning, discipline, and planning. You should also have some disposable income on the side to help you cover any loss you might incur.
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