Forex trading and stock trading both involve buying and selling—of currency and stocks respectively—in a bid to make money.
But when you buy and sell shares, you are buying and selling a portion of ownership of a listed company, such as Tesla or Netflix. When you trade currency, you are speculating on the movements of international currency markets to make a profit.
Forex trading also has its own unique lexicon, with jargon such as ‘currency pair’, ‘bid-ask spread’ and ‘pips’. Understanding these terms is crucial to your success as a Forex trader. While both stock and Forex trading aim to ‘buy low, sell high’, how they achieve this, the strategies traders use, are vastly different.
Another key difference is that stock-market trading is limited to the hours of the respective markets that you are trading in. For example, the Australian Securities Exchange (ASX) standard trading hours are 10am to 4pm, Sydney time. Forex, on the other hand, never sleeps, with its four main trading hubs London, New York, Tokyo and Sydney each coming alive as another hub closes, with the exception of the weekends.