Being confident enough to become part of the global Online Trading Market requires an understanding of what you are actually looking to invest in. Seems obvious, right? Well, it actually may not be as simple as you think and this is why our team at XPro Markets has created this article to clear things up for you.
One of the most common questions of a beginner is whether it is best to trade CFDs in Forex or CFDs in Stocks. So, if you are one of the many newcomers in the trading world who are wondering which is the best market for you, between Forex and Stocks, today’s article will guide you through the basics.
What’s the difference?
Remember, CFDs are ‘Contracts or Difference’, meaning that they are a derivative product because they enable you to speculate on financial markets, without having to take ownership of the underlying assets.
CFDs in Forex, also known as the foreign exchange market, give you the opportunity to predict the direction in which you think a currency pair’s price will move.
CFDs in Stocks refer to partial ownership of a company’s assets and profits, with the profit or loss calculated as the difference between the purchase price and the selling price.
What are the factors to consider?
While, of course, the first main point to think about is which market you actually prefer, there are some additional aspects that could help you narrow down your decision.
For starters, market trading hours differ for forex and stock trading. The forex market is open for 24 hours, 5 days a week, while stock exchanges across the world open at different hours, depending on the specific region and exchange. For example, Hong Kong stock market hours will not reflect those in the UK, because of general differences in culture and work politics. It is also important to know that holidays around the world can affect different assets, so XPro Markets makes sure you stay updated with all the upcoming Financial Market Holidays.
Another aspect to consider is price fluctuation, which is measured by volatility and liquidity. Many short-term forex traders seek high liquidity within the market, so as to buy and sell more rapidly, while traders in the stock market open positions aiming to profit in the long term, thus expecting a less volatile environment. Chart Analysis tools can help you stay in the loop by better analysing price fluctuations of their favourite assets.
Lastly, let’s think about how each market is influenced and the importance of staying updated with global market news. When share trading, there are elements that could directly affect your chosen asset, such as the company’s debt levels and earnings, as well as economic data and news reports. But with forex, the focus is usually on the macroeconomics of each host country of the currencies. For example, unemployment, inflation, and gross domestic product (GDP) are aspects that could highly affect the forex market, as well as major political events.
So, which one do you choose?
There is no definite answer. Each individual trader is different when it comes to personality, experience, and preferences, and this is what keeps the markets booming. Some traders may choose one market to start with, while others trade in multiple. It is up to you to decide which market best fits your daily routine and personal style. It is essential to take time to consider each option and its specifications, so as to be able to reach a final decision.
Which one do you believe would help you reach your trading potential?
