The Forex exchange one the world’s most extensively traded markets and allows traders to invest on fluctuating price movements in the worldwide currency market. But should you begin to trade on the Forex exchange or the stock exchange?

Here’s of the key differences between stock trading and the global currency markets to help you decide which is right for you.

Leverage

One of the key reasons that traders choose to operate on the forex market instead of the stock market, is forex leverage. Put simply, this means you can invest a small amount of money with a view to controlling a larger amount.  This allows you to leverage your money further for maximum gains. 

There are no leveraging restrictions with the Forex exchange, whereas with stock trading the maximum leverage usually is 2:1; and there are sometimes qualifying procedures before you can leverage on the stock market. Forex, however, has no leverage qualifications – you can simply open an account and begin to trade.

A highly liquid market

Stock traders buy company shares that can cost anything from a few dollars to thousands of dollars and the market prices are at risk of fluctuating at a greater extent with supply and demand than the Forex market.

Whilst a country’s currency can vary, there is always a vast amount of currency to trade, making the fluctuations more stable, and therefore the global currencies are a more liquid environment in which to do business.

Accessibility to the market

Of course, it is possible to trade in stocks 24 hours a day, five days a week, but it’s not always that easy. The window for trading in the stock market is usually from 09.30 to 16.00, with an after-hours trading market that is much smaller. This can increase volatility in the marketplace.

Forex trading also takes place 24 hours a day, five days a week. But because there are many worldwide Forex exchanges – including the big four located in London New York, Tokyo and Sydney – it’s always time to trade in at least one time zone.

Are you looking to learn about Forex trading?

If you are looking for support to help you to build up a solid knowledge of the global currency trade, then Your Trade Mentor provides an entry-level package with access to a range of complete training videos to get you started.