Know the Difference between Forex and Stocks – For those of you who like to invest or trade, surely you will find out what trading, forex or stocks are. The following are the differences between Forex and Stocks that you should know
1. Differences in understanding forex and stocks
Although both are investment markets. However, in terms of understanding alone already visible difference. Forex is defined as a type of trade or transaction that trades the currency of a country against the currency of other countries involving the main money markets in the world for 24 hours continuously.
Meanwhile, shares are proof of ownership of the value of a company with a claim to the income and wealth of the company. Stocks are one of the capital market products that are one of the investment instruments for the long term. So, shares can be purchased in the capital market by qualified investors.
2. Different traded instruments
In forex, the instruments traded are the currencies of countries in the world that do not have a centralized exchange. Meanwhile for shares, the instruments traded are proof of ownership of a company or limited liability company registered on the Indonesia Stock Exchange.
3. Has a different liquidity appeal
Liquidity is the ability of a company to meet its short-term obligations when they fall due. In the investment world, liquidity can be the main attraction for investors.
In the forex market, the liquidity is the most liquid compared to others because of its large capitalization. Meanwhile, liquidity in the stock market is highly dependent on the popularity and capitalization of the shares purchased.
Also Read :How to Trade Crypto Safely
4. Volatility that shows the price fluctuations of the two is different
An easy definition of volatility is the market mood to see if the price spikes sharply or even falls freely (fluctuation range) which means that there is high volatility.
However, volatility is not the same as risk. In this case, volatility can be used to measure risk opportunities, but cannot be directly used as a benchmark as a source of risk in foreign exchange transactions.
In the forex market, the volatility is very high. This means, prices can go up high quickly and can go down quickly too. In contrast, stock price patterns tend to be more stable and can be tracked over time.