Similarities and Differences Between Forex and Stock Trading

Investors are always searching for opportunities for entering the global marketplace and earning money through trading. This is primarily why most of them turn to forex and stock markets for the purpose of trading. However, both stock and forex markets have their own pros and cons and thus traders must acquire adequate knowledge about both the markets in order to place profitable trades. Here, learn more about the similarities and differences between the forex and stock trading.


In order to succeed in stock and forex trading, investors must garner adequate experience as well as knowledge around trading. Traders must also plan and prepare in advance in order to get started and tread cautiously. Below, find some of the similarities between forex and stock trading:

Trading Platform: Both stock and forex trading is carried out via brokers who in turn offer their highly advanced platforms for trading or offer proprietary software that offers smooth and hassle free trading experience. Hence, it’s crucial for traders to opt for brokers based on their trading preferences and style.

Fundamental Analysis: Traders must conduct an in-depth fundamental analysis in order to trade forex as well as stocks. While stocks requires a trader to study and learn more about different companies and their income statements, in the case of forex trading, the traders must analyze the global economies and data or figures announced by different countries on a regular basis.

Technical Analysis: Both forex as well as stock trading require traders to conduct technical analysis for successful trading. While, forex currencies keep fluctuating on an off and on basis, the stocks keep changing their directions as well.

Forex trading


In addition to the above mentioned similarities, there are several differences between forex and stock trading as well. Below are a couple of differences that traders must take into account before trading both stocks and forex currencies.

Leverage: When it comes to trading forex, traders must simply create a forex trading account and trade with a 2:1 leverage. However, in order to leverage in the stock market, traders must first create a margin account.

Differences in Liquidity: When a trader trades stocks, he/she is buying shares of different companies, which are priced anywhere between a couple of dollars to more. The prices basically vary in accordance with the demand and supply of the stocks. Forex trading, on the other hand is different, traders always have a surplus amounts of currencies for trading.

foreign currencies

Paired Trades: In the case of forex trading, the currencies get quoted in different pairs. As a result, traders need to be aware of the economic condition of both the currencies. Additionally, their fundamental issues are different for both the markets. However, when a trader purchases shares/stocks of a company, his/her are majorly concerned whether the stock’s value would increase or not. Thus, they’re less worried about the stock values of other organizations. Additionally, the forex market is much more sensitive to the economic and political situations within different countries unlike stock trading that is less immune to such foreign conditions or issues.


Biggest IPOs of the Last Decade

The stock market wouldn’t even exist if it wasn’t for IPOs. These are essentially what started the stock market and are the reason normally public individuals can invest and trade the shares the companies give to the public.


An IPO is an initial public offering and is something a company does when it wants to allow the public section to invest and trade their shares. Initially, a company will be private, being owned specifically by the CEO with close investors, usually family and friends. The private company might also have early investors (venture and angel) who have put money into the business to see a profit. Once the company has reached a certain threshold it will be ready to go public, allowing the normally individuals in the world to invest their money into the business. When a company has an IPO, it is “going public”.

When a company goes public, it can go various ways. Sometimes the company will get no to little sales, whereas some companies explode and get thousands of traders the moment they launch an IPO. This article will go through some of the biggest IPOs in the last decade so should you how much money some companies made. – 2005

Baidu is a Chinese internet search company similar to Google. They launched their IPO in 2005 at an initial price of $27, which is still considerably high. At the end of their first trading day, the shares were worth $122.54, producing a 354% rise on their first day. At this current point in time, their shares are worth $135.85 and have been growing since 2010.

Qihoo 360 Technology – 2011

Qihoo is another Chinese search company that has its IPO in early 2011. They started off their initial shares at $14.90 and at the end of the first trading day of their IPO, their shares rocketed 134% to a share price of $34. However, their share prices are a lot lower today at $28.85.

NYMEX – 2006

NYMEX is actually related to the stock market and is a futures trading platform for commodities. The company is now privately owned again under the CME group. When they first launched their IPO in 2006, their initial share price was $59. On the first day of trading this went up by 125% to $132.99. As already stated, there is not current share price because the company is now privately owned. – 2010

Youku is China’s version of YouTube. They opened up their IPO in 2010 at an asking price of $12.80 a share. This rapidity increased by 161% on the first day, totally $33.44 a share. Currently, their share price as sold off slightly but still stands at $50.26.


The Impact of IPO’s on the Stock Market

IPOs have a huge impact on the stock market. As you can see above with the massive IPOs that happened in the last decade. Their presence causes huge spikes in trades and can make some people a lot of money. However, not all IPOs have this effect and many of them start out relatively slow. This is true with new companies that need investment, particularly penny stocks. However, if you position yourself at the right time, you can make a fortune.

How Are ETFs Different From Mutual Funds?


There are a lot of financial products in the stock market, and one of these is called Exchange Traded Funds or ETFs. For some reasons, ETFs can be likened to mutual funds, but are being traded in the form of stocks. You need to get educated with this type of investment or advised by a trusted finance consultant before coming up with the best strategy to handle them right.

What are ETFS?

Technically, ETFs are a type of fund that owns shares of bonds, stocks, gold bars, oil futures, foreign currency and other underlying assets. These are considered one of the best entries when trying to make an investment portfolio. Most people engage with these products to get a balanced approach in mixing bond and stock funds.

How are ETFs different from mutual funds?

  • ETFs are tax efficient compared to regular mutual funds. Tax spending happens when you sell an ETF and when you distribute fund through capital gain. The catch is that an ETF rarely allocates capital funds compared to mutual funds.
  • ETFs provide a current and definite view of holdings because reports are done on a daily basis. The transparent updates can help you know more about possible risks, trends and recognize overexposure to some markets.Various-type-of-financial-and-investment
  • ETFs, let you access unique types of investment. You can own shares of precious metals including platinum, palladium, gold, and silver.
  • ETFs also allow you to diversify your finance portfolio by letting yo invest according to characteristics, geography and market sectors. You can have shares in real estate, energy and dividend-paying stocks all at the same time.

What are the advantages of Exchange Traded Funds?

There are three main benefits of ETFs which substantially create an impact on the profitability of any investment:

  • Tax efficiency – As mentioned earlier, ETFs have a variety of stocks considered to be more efficient compared to index funds. ETFs also allow the investors to trade to significant volumes and receive non-cash payments. If an investor buys shares, then tax is deferred until the stock is sold.Streaming-Tickers
  • Diversification – Your investment will not focus on one stock or product alone. ETFs have diversified opportunities allowing you to invest in international shares and specific industries like energy, biotech, and technology.
  • Low expense ratio – Exchange Traded Funds cost less, have broad diversification and low turnover. You can be charged up to 10% on mutual fund fees while up to 1.25% on ETF expense.

What are the disadvantages of ETFs?

  • International exposure is limited – Although there is a vast range of ETF products to trade in the US market, some countries include large-cap products. A new investor might not be able to access mid and small-sized stocks.
  • The intra-day trading scheme may only be perfect for short-term ETF owners and not to long-term traders.
    A risk of investment inactivity – Some investments may not be as active as other traded goods due to issues which are regional or sector-related.

Investing in ETFs are rewarding and satisfying if you know how to handle its risks and benefits. Do your research and create an investment plan and strategy to make the most out of your shares.

What is Short Selling?

Short selling is an amazing concept. You will be selling a stock or any kind of financial instrument that you have just borrowed so that you can make a sale. This is truly awesome, but you need to get more information about this right away. So read on.

Traders like Tim Sykes have popularized short selling, but new traders don’t always know how to get started.


Liquidity in the Stock Market

A short seller will provide liquidity to the financial markets restraining any influence about the exuberance of investors over time. They should not be seen as cynics trying to pry on other people`s mistakes but rather they should be treated as legitimate players in the investment world. Short selling is good for the market because it prevents any stock from getting too high down the road during peak time. Short selling is perilous in any surging market out there.


The short-selling process can be easily illustrated using a real-world example. To short any kind of stock, you will need to open a margin account at any brokerage firm out there. This will allow you to have fun in no time. You will need a certain amount of money to open this account so you can have some margin. Let`s say that you want to sell a hundred shares of a $10 stock. You will have to put in $500 as your account`s margin.

Common Short Sellers

Hedge funds are some of the most important investors in the world of short selling. If a hedge fund considers that a sector or stock is overvalued, they will use short selling so they can hedge this risk of the market. Sophisticated investors love short selling. They use short selling so they can speculate or hedge market risk over time. Speculators also play the short selling game from time to time, and they love it.

Short Selling Regulation


The uptick rule was imposed to the short selling world. This rule was created to avoid short seller from exacerbating any downward movement of a stock when the financial instrument was declining. In 2007, the SEC just ruled out this rule. Some experts in the short selling field believe that this action contributes somehow to the development of the market volatility and bear market of the years 2008 and 2009. In 2010, the SEC adopted what was called an alternative uptick rule.

Rewards and Risks

You can think of short selling as a kind of insurance for the world of financial markets. Let`s give you another example. Say you have a bought the S&P 500 index via a mutual fund. Say also that you have a short selling position for this index. If the market falls at a certain point in the future, you can make good money down the road. This is probably what will happen over time.

Remember that short selling is truly here to stay for the long run because it provides real liquidity to the market. This is truly important for the stock market because of the problems caused by downward trends in many stocks out there. There is some kind of regulation regarding short selling, but this will not prevent hedge funds and speculators from having fun and making profits via this amazing concept these days.