Traders often compare forex vs stocks to determine which market is better to trade. Despite being interconnected, the forex and stock market are vastly different. The forex market has unique characteristics that set it apart from other markets, and in the eyes of many, also make it far more attractive to trade.
When choosing to trade forex or stocks, it often comes down to knowing which trading style[1] suits you best.But knowing the differences and similarities between the stock and forex market also enables traders to make informed trading decisions based on factors such as market conditions, liquidity and volume.
Top 5 Differences between forex and stocks
The table below summarizes a few key differences between the forex market and the stock market:
|
Forex Market |
Stock Market |
|
Large volume- Around $5 Trillion per day |
Less volume – Roughly $200 billion per day |
|
Highly Liquid |
Less liquid |
|
24 Hour Markets |
8 Hour Markets |
|
Minimal or no commissions |
Commissions |
|
Narrow Focus |
Wide Focus |
Let’s take a more in-depth look into how exactly the forex market compares with equities (stocks).
1) Volume
One of the biggest differences between forex and stocks is the sheer size of the forex market[2]. Forex is estimated to trade around $5 trillion a day, with most trading concentrated on a few major pairs like the EUR/USD[3], USD/JPY[4], GBP/USD[5] and AUD/USD[6]. The forex market volume dwarfs the dollar volume of all the world’s stock markets combined, which average roughly $200 billion per day.
Having such a large trading volume can bring many advantages to traders. High volume means traders can typically get their orders executed more easily and closer to the prices they want. While all markets are prone
