What is The Difference Between Forex and Stock Market

Senior investors recommend stocks because stocks tend to be projected for the long term and price movements tend to be less volatile.

However, for traders who like challenges and want to reap profits in a shorter period, they tend to recommend forex which has relatively higher volatility.

What is The Difference Between Forex and Stock Market

In stock trading, the product being traded is the security of a company’s share ownership. Meanwhile, in forex trading, the products being traded are contracts for the price of a country’s currency with another country’s currency.

In forex trading, you will see a comparison between the price of a currency and other currencies, in contrast to stock trading where the value of a company’s shares is not compared to other stock products.

Number of Products Traded

In stock trading, there are more than 10,000 stocks worldwide, while in forex trading there are not too many choices. As mentioned in the first point, in forex trading a currency is compared to other currencies. For example the Euro against the US Dollar or what is commonly called EUR/USD.

At least the product in forex trading can be both positive and negative values. The positive is that traders don’t have to bother choosing too many products like stock trading. It’s just that there are not many negative choices for traders who want to experiment with various investment products.

Factors Influencing Technical Analysis

In stock trading, a trader must analyze the factors that affect price changes in the market, starting from the smallest. In technical analysis of stock trading, traders will analyze starting from the smallest data such as the company’s financial statements, then the sectors related to the company, then stock traders analyze the condition of the country.

Meanwhile, in forex trading, a trader does not need to analyze any company data. Because trade is directly related to a country’s currency, the data that must be analyzed is the condition of one country and another.

Short Selling Facility

Short selling is a method used in selling stocks or forex where investors/traders borrow funds (on margin) to sell shares they don’t own at high prices. The hope is that investors/traders will be able to buy back and return the loan of the shares to the broker when the shares fall.

In forex trading, there is a short-selling facility, while in the Indonesian stock market there is a short-selling facility. Short-selling is found on the United States stock exchange, it’s just that the IDX (Indonesian Stock Exchange) prohibits short-selling rules because short-selling actors can trigger a decline in the JCI. Why?

As previously mentioned, an investor/trader can sell shares by borrowing funds to sell stocks or forex that they don’t own, if the price of the stock or forex falls then the investor/trader will benefit.

Meanwhile, if the price rises, the investor/trader will lose money. Because of this, it is not uncommon for investors/traders who do short selling to be accused of spreading false rumors in order to lower market prices. It is feared that this could damage the actual value of the JCI.

Market Fluctuations

There are quite significant differences in market fluctuations. The forex market has higher fluctuations than the stock market. This is influenced by differences in market capitalization. The forex market has a larger market capitalization than the stock market.