Therefore, when choosing a currency to invest in Forex, it is necessary to analyze the country that is the issuer of that currency. Of course, this is a factor related to stocks, but FX has a direct effect.
In particular, the United States situation and fluctuations in the US dollar price affect many FX currency pairs.
The United States is the one that influences the financial markets, regardless of whether it is FX or stocks.
Unlike Trading in Forex, stocks invest in companies
Compared to the FX currency pair, the world of stocks is about 3,700 stocks, with only domestic spot stocks listed on the Tokyo Stock Exchange.
These domestic cash stocks are divided into multiple stock markets such as TSE 1st Section, TSE 2nd Section, Mothers, and NASDAQ, depending on listing criteria such as the number of shareholders and market capitalization. Forex does not divide the market in this way.
The main criteria for listing shares on the First and Second Sections of the Tokyo Stock Exchange are the stock company’s continuity and profitability.
On the other hand, Origins is reviewing the corporation’s growth potential and is targeting start-up companies.
In general, it is said that EM currencies have higher volatility in Forex, and EM companies have higher volatility in stocks.
When compared with FX, in order to trade domestic spot stocks, you have to analyze the company yourself from a huge number of corporations and select the corporation to invest in.
Due to the large number of stocks, stocks may take more time and effort to analyze than FX.
Difference between FX and stock trading hours
Forex can be traded 24 hours a day on weekdays, but domestic spot stocks can only be traded from 9 am to 3 pm when the exchange is open.
- Unlike stocks, FX can be traded 24 hours a day on weekdays
- Forex trading with 24-hour internet connection
- Since the exchange rate keeps moving 24 hours a day on weekdays, you can also perform Forex trading 24 hours a day.
Many Forex companies start Forex trading at 6:00 or 7:00 on Monday time and end Forex trading around 6:00 or 7:00 on Saturday morning.
However, depending on the Forex company, maintenance will be done for several tens of minutes in the early morning, so be careful when there are times when Forex trading is not possible.
Forex trading is possible 24 hours a day because forex trading is not a real market but mainly consists of electronic trading such as telephone and internet, and forex trading is done all over the world.
For example, in the early morning of Indian time, FX trading is carried out in Oceania, such as New Zealand and Australia, and from around 9 o’clock, Asian countries such as Japan, India will start actively trading FX.
Then, FX trading centred on the United Kingdom will start around 16:00, and then it will shift to FX trading centred on the United States.
After the US-centered Forex trading, FX trading in each country is connected like a string of FX trading in Oceania, so it is possible to do Forex trading 24 hours a day from Monday morning to Saturday morning.
Forex and stocks: how many times can you trade for funds
Based on the principle of leverage, just as a large effect is produced by applying a small force, FX has a mechanism that allows you to trade a larger amount with only a small amount of “margin”.
The leverage that domestic Forex companies can provide is up to 25 times as stipulated by the Financial Services Agency.
On the other hand, domestic cash stocks cannot be leveraged for trading. There is also a system called “margin trading” that allows you to trade about three times as much as the “margin” by using your own investment funds as collateral as “margin” for domestic cash stocks.
Minimum required funds
In the case of domestic stocks, the minimum amount of funds required varies greatly depending on the stock.
When trading large companies listed on the First Section of the Indian Stock Exchange, it is often necessary to have at least several hundred thousand INR.
On the other hand, in the case of Forex, most traders can trade from 1000 currencies. In addition, using “leverage” makes it possible to start trading with a smaller amount of investment funds.
Unlike stocks, FX has no price range limit
Forex does not have a price range limit called a circuit breaker in domestic stock trading.
The stock trading circuit breaker is a mechanism that warns that stock market trading will fluctuate suddenly in a short period of time, and liquidity will drop sharply at each stock exchange and will stop buying and selling stocks when certain conditions are met. This applies to both individual stocks and stock indexes.
Forex and Stocks: Differences in Fees
The transaction fee for domestic cash stocks may be set according to the transaction price, or it may be a flat rate system.
Forex trading fees, on the other hand, are basically free for many companies.
Forex has a “spread” that is the difference between the bid price and the asking price.
This “spread”, which is not in the world of stocks, is a substantial fee, and its setting differs depending on the Forex company and currency pair.
2020 Oricon Customer Satisfaction Ranking FX Trading The dollar-INR spread of “Money Partners”, which won first place in the transaction fee category, is 0.3 INR, which is as high as the fee of 30 INR when trading 10,000 currencies.
Unlike stocks, Forex is characterized by trading large amounts of money and expecting profits by applying leverage to a small number of funds.
Therefore, compared to stock investment, the hurdle to start investing is low in terms of funds.
Also, unlike stocks with limited trading hours, FX has the advantage of being able to trade 24 hours a day on weekdays, so of course, there are fewer time constraints than stock investments that can be traded only during the day on weekdays.
This is one of the reasons why it is popular with office workers who cannot trade during the day.
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