If you are at the beginning of your career in the world of investment and trading, you should know that this decision may be one of the most important decisions you make in your life.
The investment process is about putting your money in a business or a trade to earn more money. But before you start investing, you have to decide your destination; in other words: you have to choose the financial market that suits your personality and investment ideas.
The stock market and Forex are among the most prominent markets in terms of investment.
Forex Market and Stocks Market
Initially, you need to remember that these two markets are different from each other, require high learning ability and general knowledge of each business tools and applications for investment, and require investors to possess a certain level of risk management skills that are developed by allocating time to trade and learning from the lessons.
On this topic, we will talk about the following items:-
- What is Forex?
- Some famous Forex trading companies.
- What is stock trading?
- Some famous stock trading companies.
- What are advantages and disadvantages of forex and stock trading?
- What is better for new investors?
What is Forex?
The Forex or foreign exchange market is the largest financial market in the world, trading more than $ 3 trillion a day. This market is based on global currency trading.
The process of trading in Forex by buying or selling “currency pairs”, where the trader is trading one currency for another.
Examples of the major currency pairs are (EUR / USD), (USD / JPY), and others.
- Some famous Forex trading companies:
Finding the right Forex Company that suits your needs is one of the most important decisions that an investor makes before starting trading.
Therefore, it is very important that a good decision is made after studying this matter.
There are many different Forex companies such as:
- Legacy FX
These companies are the top five forex trading companies currently.
What is stock trading?
Stock trading in the stock markets is the place where these shares are bought and sold, and the stock markets also have strict laws regarding the trading of stocks and companies listed there.
In the past, stocks were traded, bought and sold in (non-electronic) trading halls, after that these halls began to disappear due to reliance on electronic trading.
Some famous stock trading markets:
- New York Stock Exchange (market size 19223 billion USD, more than 200 years).
- NASDAQ Stock Exchange: (Market size 6831 billion USD).
- London Stock Exchange: (Market size 6187 billion USD).
- Tokyo Stock Exchange: (Market size 4485 billion USD).
- Shanghai Stock Exchange: (Market size 3986 billion US dollars).
- Hong Kong Stock Exchange: (Market size 3325 billion US dollars).
What are the advantages and disadvantages of forex and stock trading?
Traders are confused when comparing Forex trading and stock trading, and that’s really confusing, but each Both of them have advantages and disadvantages, we will know it now:-
Advantages of forex trading:
- No broker needed.
- You can trade in Forex without paying any commissions or fees.
- It can be traded 24 hours.
- The Forex market is not subject to any central bank in any country.
- Forex is also the most liquid in the currency markets, because it provides high leverage for traders.
- Traders can start investing their money with small capital.
Disadvantages of forex trading:
- Prices in Forex are extremely volatile, which leaves traders exposed to sudden risk.
- It is difficult to control traders’ fear of loss while making deals, and this could expose them to actual loss.
- Some traders trade with unlicensed companies, which may expose traders to lose their capital without being able to take legal action against these companies.
Advantages of stock trading:
Shares’ trading brings benefits to the owner through:-
- Increasing his share of the company’s ownership, which represents the share value he owns, as the company grows.
· Obtaining dividends from the company’s profits.
Disadvantages of stock trading:
- The risk of a decrease in the share price.
- The risk of fluctuating company profits.
- Risks of non-liquidity per share, which means low demand for its purchase.
If you have a lot of money, and you have a long time horizon, you can achieve the maximum profit and benefit by buying real shares from the stockbroker, and at this level the commission ratio (balance) is more beneficial and stable because it is a fixed amount. On the other hand, if your account is small and not enough to buy stocks and you want to trade in shorter periods of time or trade for only one day, you will likely have a better opportunity to trade Forex through your broker and the company you are dealing with.
What is better for new investors?
When a novice trader wants to start investing his money, he/she needs to invest with somewhat guaranteed profits and a small loss and the choice is made between trading foreign exchange or stocks.
In my personal opinion, Forex trading for beginners is more appropriate than stock trading; for the following reasons:-
- The Forex market has many advantages compared to traditional stock markets, and Due to the huge Forex market, you will find that analysts in the Forex market or any other category cannot influence the direction of the market and cannot lead the market towards a particular direction.
- On the other hand, in the stock market, any news from analysts can have a significant impact on the direction of the company.
For these reasons, most investors prefer trading in the Forex market more than the stock market.