In this article you’ll learn the biggest differences between the stock market and Forex.
1 – Leverage: On stocks, the leverage is usually 2:1 which means that if you have $2.000 in your trading account, you can buy up to $4.000 of a stock. If your account has more than $25.000 it can be considered as a day trader account and in this case, your maximum leverage might be as big as 4:1 for day trading only. On Forex, the maximum leverage is usually up to 200:1. This means that with $2.000 in your Forex account you can purchase up to $400.000 of your favorite currency pair. Some brokers offer even higher leverages that go up to 400:1!
2 – Variety: On the US stock market alone there are over 10.000 stocks. This means you have a lot of opportunities to trade but also a lot of complexity in order to find which stock you’re supposed to trade. On the Forex market, there are only 4 major currency pairs: EUR/USD, GBP/USD, USD/JPY and USD/CHF.
3 – Commission fees: On stocks you usually pay a commission when you buy or sell stocks. This commission can be based on the number of shares you’re purchasing or it can be a fixed commission like for example $10 for unlimited number of shares. On Forex the commissions are free. You don’t pay any commission by buying or selling a currency. The only cost is the spread.
4 – Schedule: The US stock market is open Monday to Friday from 9.30am EST to 4pm EST. The Forex market is open 24 hours a day from Monday to Friday. This brings unlimited opportunities to traders worldwide.