It is not a good time to keep your money in the bank at current interest rates.
Every day your money sits in your bank account, it is devaluing due to inflationary pressures.
Everyone is telling you to invest your money to protect it from inflation, but you are new to the world of investments.
While one person tells you to invest in Forex, another swears by stocks.
It can be confusing, especially when you are new to the game.
Here is a fun fact – In 1992, George Soros, an investor participating in day trading, made approximately $1 Billion in a day and was said to break the Bank of England.
Fun Fact two – Warren Buffet’s Berkshire Hathaway company is the most expensive publicly traded share of all time at a value of $487 255 per share as of the 18th January 2022.
Let’s look at whether you should be investing in stocks or Forex as a new investor.
Before you decide, it is a good idea to learn Forex trading and Stock trading before making a final decision.
Table of Contents
What is the Difference Between Trading in Stocks and Trading in Forex?
There are several differences:
Liquidity
Forex trading has a much larger supply and is more liquid than the Stock Market.
Although a country’s currency can fluctuate. There is always a large amount of liquidity and currency to trade.
When you buy stocks, you are buying shares in accompany. The price of these shares fluctuates with supply and demand. A large purchase of shares by a buyer can affect the share price (especially in smaller companies) but is unlikely to affect the Forex rate.
Market Hours
The Forex market is open 24 hours, five days a week internationally. However, forex trading is restricted to 9:30 am to 4:00 pm (EST) from Monday to Friday.
Leverage Limits
Leverage limits are much higher in Forex trading at a ratio of 50:1 or even more. Stock trading has a standard leverage limit of 4:1.
Forex is a lot less regulated than the Stock Exchange. As a result, people who don’t like regulations are often keen on Forex trading. In contrast, those who value protection against fraud and wrongdoing often trade in Stocks.
Trade Pairing
In Forex, you can pair any two currencies. On the Stock exchange, you deal in USD.
When dealing in Forex, you need to consider the economic factors and well-being of two countries, so analysis can be pretty complicated with many factors to consider.
Dealing in stocks, you are simply concerned with whether that stock will rise or fall, and you are paying for it in USD.
Forex is generally more sensitive to geopolitical issues, whereas stocks are less susceptible.
To Conclude
If you are risk-averse and have a longer-term strategy to buy and hold, invest in stocks. This will provide you with a safer, more regulated environment.
If you prefer the higher risk, higher reward model and do not mind lack of regulation. If you prefer to be hands-on and like making your profits (or losses as the case may be) quickly, you would probably be better off trading in Forex.
Whichever you decide to do, spend time researching both. The more you educate yourself on investing options the better.