Stock market and forex transactions are among the most used investment instruments in the financial market. However, while the stock market is a financial instrument that investors have been actively following for a long time, the forex market has become widespread in recent years. Therefore, arraying the differences between the stock market and Forex allows us to understand better and compare them.
Differences Between Stock Market and Forex
Trading Hours: While trading is done 24 hours a day on weekdays in Forex, transactions are made within a certain session period in the Stock Exchange. Bist trading hours are between 09:15-17:40. The forex market is more advantageous due to the long trading time. Besides, both markets are closed on the weekend (Saturday-Sunday).
Leverage: While investors can trade as much as their current savings deposited in their account in the Stock Exchange, they can open transactions up to 100 times the amount they deposited in Forex. However, the risk factor is higher in the forex market, as the loss may be at the same rate.
Bidirectional Operation: When investors BUY on Forex thinking that the prices will rise, they profit from the rise. Likewise, if they think the prices will go down, they open a SALE transaction, and they win when the prices drop. In this way, they can profit from both BUY and SELL transactions. In the stock market, it is only earned from the increase in prices. Since there are two-way transactions, the fx market becomes more advantageous than stock market investment.
Liquidity: In the financial sector, the fastest liquidation of investment instruments is as important as making a profit from them. Investors can close their open transaction in the FX market in minutes or even seconds, and when they want to receive cash, they can perform their transaction within minutes on the same day. If the day the transaction is closed (the stock is sold) in the Exchange is today, the date of the money being transferred to their account will be the next day. This clearing, which works as T+1, may be a disadvantage for some investors.
Volume: Forex is a huge market that is traded worldwide, with a daily trading volume of approximately $5.5 trillion. On the other hand, the stock market has a smaller trading volume based on the country it is located in. Since Forex has a very large volume, it does not allow manipulation and speculation. On the other hand, manipulation and speculative transactions are possible in the stock market.
Spread: A separate commission is charged for each transaction in the Exchange. Although it differs on an institution basis, this rate is approximately 0.2%. In the Forex market, there is no transaction commission. On the other hand, only the difference between the Buy and Sell price is paid in the transactions made. In Forex, the difference between the Buy and Sell price is called the spread, and it differs according to the traded product. Because of the low spread, opening a forex transaction becomes more advantageous than a bank, exchange office, and stock market.
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