You probably know what Forex and the Stock market is by now since they are usually talked about in the news, especially the ones that focus on finance and business as what as offered in the stock broking services in Malaysia.
The main distinction between the two is that Forex or Foreign Exchange is a market where you trade currencies. Conversely, the stock market involves buying shares or stocks, which is a legal representation of ownership of a particular company in an industry.
With that being said, one of the questions asked by many people is which one is better in terms of profits? To be honest, that question cannot be answered by giving you a cut-and-dry solution. Instead, you have to decide for your own which one works for you based on its advantages and disadvantages, which I happen to talk about in this article.
Okay, we will first start the discussion by talking about the differences in regards to the system of exchange. Forex trading is more decentralized due to the fact that the market involves investors from around the world. This means that it works 24 hours a day since, in one part of the globe, it will be the normal working hours while the other part is asleep.
On the other hand, the stock market usually opens at specific times based on location as there are stock exchanges that are scattered in the different parts of the globe.
Also, in terms of transparency, the stock market provides more of that given that it is a more regulated market. This means that the investors will have the confidence to conduct trades from within the market.
However, whereas the stock exchange is more transparent, there is no doubt that the Forex is much larger in size given that, well, it is the largest financial market in the world.
Because of the nature of how the Forex works, it provides more liquidity than the stock market. To make it simple for you to understand: because the forex works 24 hours a day, trades can be made at any time, usually with lower transaction costs and a promise of greater market gains.
For the stock market, it only works during the trading day and the price of stocks vary greatly depending on the company.
The scope of each market is also an important factor. The stock market has a relatively low focus that investors and traders can just look at an individual company’s shares and growth.
However, that is not the case with the Forex because investors would have to look at things from the macro scale. You have to look at it from an economic standpoint where you factor in the country’s unemployment and inflation rates, GRP, and other economic factors.
So, as an investor, which one should you choose? Actually, you are the only one who can answer that because, at the end of the day, it is what works for you best that will determine which one is better.