62.96% of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Important Notice - Scam website
Important Notice - Fraud awareness
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 62.96% of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
Important Notice - Scam website
Important Notice - Fraud awareness
The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
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    Forex vs Stocks: What's the Difference? - Trading Strategies for Beginners

    Most people think of fixed deposits and P2P products when it comes to financial management. When it comes to investments, most people think of businesses, residential buildings, and franchise stores. Finally, when it comes to trading the financial markets, people think of stocks, foreign exchange, cryptocurrency, and indices.

    Financial management, investment skills and trading skills are not the same. The former two require significant funds and long-term holding patience; the latter requires high leverage and sharp trading skills.

    The trading threshold in the financial markets is relatively low; anyone can enter the financial market and start trading. The risks associated with trading are immense; hence,  without the right trading experiences and skills, it is difficult to thrive in this challenging industry. Beginners need to learn the different ways to trade when entering the financial markets. This article will compare the stocks and foreign exchange markets. Although it will not cover many trading skills, beginners must build an objective market perception.

    ATFX_financial-market-trading

    Forex and stocks comparison

    The essence of the foreign exchange market and the stock market is the same. The stock market trades shares distributed by listed companies and the foreign exchange market trades "shares" distributed by a country, but these shares are called currency. If you are optimistic about a listed company’s growth prospects, you can buy its stock. In contrast, if you are confident about a country’s economic potential, you can buy and hold its currency. Shares typically receive regular dividends, while currencies have steady interest income. Traders can check the economic calendar or market news to predict current and future market conditions.  

    ATFX_forex-vs-stock

    There are some significant differences between stocks and forex. These differences seem to be the advantages of the foreign exchange market and the shortcomings of the stock market. Firstly,  the A-share market does not allow short selling, which is a significant limitation as it prevents traders from profiting from falling stock prices in adverse market conditions. If there were a short-selling mechanism, the situation would be drastically different. Traders in the foreign exchange market can easily short-sell currency pairs to participate and profit from adverse news events or economic releases. 

    In addition, the trading hours for the stocks and foreign exchange markets are vastly different. The A-shares market is only open 4 hours a day, while the Forex markets are open  24 hours a day. Responsibly speaking, you will not find trading opportunities in the markets throughout the 24 hours when they are open. Most trading opportunities are concentrated in the European and US markets, from 4:30 pm Beijing time to 4 am the following day, which is almost 12 hours. In any case, the trading time for the foreign exchange market is much longer than that of the stock market, which brings convenience to traders. Hence, traders do not have to worry about significant policies and news being announced when the Forex markets are closed like in the stock market.

    Taking the stock market as an example, in 2015, the Ministry of Housing and Urban-Rural Development issued a new policy of 330, reducing the down payment ratio for a second home and lowering the ratio for provident fund loans. This was good news for A-share real estate companies, but if the information was released after 15:00, traders could not participate in the explosive market movement in time.  They could only participate in the centralised bidding the next day, which does not favour retail investors. 

     Many of the advantages of the foreign exchange market over stocks have been mentioned above. However, the foreign exchange markets are not perfect either, as they also have some unique problems. The foreign exchange market allows for high leverage, which is associated with increased risk. High leverage can give traders a false sense of security so that they ignore existing market risks. Beginners can read the trading guidelines to start investing in the forex market to avoid unnecessary risks. 

    Download MT4 trading software or set up a demo trading account to kick start your trading journey now!

    Last Updated: 29/10/2021

    This market commentary and analysis has been prepared for ATFX by a third party for general information purposes only. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell as it does not take into account your personal circumstances or objectives, and should therefore not be interpreted as financial, investment or other advice, or relied upon as such. You should therefore seek independent advice before making any investment decisions. This information has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. We aim to establish and maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. The market data is derived from independent sources believed to be reliable, however we make no representation or warranty of its accuracy or completeness, and accept no responsibility for any consequence of its use by recipients. Reproduction of this information, in whole or in part, is not permitted.


     

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