IronFX, Are Forex and Stock markets the same?
Do you invest in Forex or Stock markets? What are the merits to invest in Stock CFDs?
Forex and stock markets are the same?
They are similar, but not identical.
The FX market, with its trends and patterns, requires different approach comparing to stocks trading.
Even though a trader made profits in the stock market, it is invalid to assume that the performance of this trader will also be successful in forex trading.
For instance, the Forex market is open 24 hours a day, excluding weekends, while stocks are available for 6 hours daily.
This means that the volatility in the Forex market is four times higher, which creates more opportunities and risks.
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Being one of the most popular financial instruments traded today, when trading shares you need to take into account both the company and the industry it falls into as well.
When trading shares there are two choices:
- Firstly, you can purchase actual shares in companies on different exchanges where they are listed.
This is a more long-term approach where the trader expects the price to rise over a period of time. Although this is traditional method, it lacks the liquidity and leverage offered by other similar products.
- Secondly, there is trading CFDs on shares.
You can trade CFDs on a particular equity by predicting the price difference of an underlying asset (in this case a share) without owning it. A CFD is a product where a broker typically agrees to pay an investor the difference in the value of a security between an opening and closing price. This is a more short-term approach where trades are opened and closed within day to week timeframes.
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