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Forex vs Stocks

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Want to jump straight to the answer? The best forex broker for most people is definitely FOREX.com or IG.

It’s never been easier to earn money from trading. Advances in online brokerage accounts and charting software mean that you can earn money trading from the comfort of your home or office — it’s no longer confined to Wall Street.

When most people hear the word “trading,” they immediately envision the stock trading market. However, forex trading makes waves among investors as the market opens to more and more traders. But which is right for you? Stock trading or forex trading? We’ll take a closer look at the similarities and differences between stock trading and forex trading. We’ll show you the pros and cons of each trading type and help you get started trading your asset of choice.

Stock Broker Comparison

Compare 3 of our top brokers in the chart below.

Best For
Futures Trading
Overall Rating
Get started securely through TradeStation’s website
Commissions
$0
Account Min
$0
1 Minute Review

TradeStation is for advanced traders who need a comprehensive platform. The brokerage offers an impressive range of investable assets as frequent and professional traders appreciate its wide range of analysis tools. TradeStation’s app is also equally effective, offering full platform capabilities.

Best For
  • Advanced traders
  • Options and futures traders
  • Active stock traders
Pros
  • Comprehensive trading platform and professional-grade tools
  • Wide range of tradable securities
  • Fully-operational mobile app
Cons
  • Confusing pricing structure to leave new traders with a weak understanding of what they pay
  • Cluttered layout to make navigating TradeStation’s platform more difficult than it should be
Best For
Options Trading
Overall Rating
Get started securely through TD Ameritrade’s website
Commissions
$0 $6.95 for OTC Stocks
Account Min
$0
1 Minute Review

This publicly listed discount broker, which is in existence for over four decades, is service-intensive, offering intuitive and powerful investment tools. Especially, with equity investing, a flat fee is charged, with the firm claiming that it charges no trade minimum, no data fees, and no platform fees. Though it is pricier than many other discount brokers, what tilts the scales in its favor is its well-rounded service offerings and the quality and value it offers its clients.

Best For
  • Novice investors
  • Retirement savers
  • Day traders
Pros
  • World-class trading platforms
  • Detailed research reports and Education Center
  • Assets ranging from stocks and ETFs to derivatives like futures and options
Cons
  • Thinkorswim can be overwhelming to inexperienced traders
  • Derivatives trading more costly than some competitors
  • Expensive margin rates
Best For
Intermediate Traders and Investors
Overall Rating
Get started securely through Webull’s website
Commissions
$0
Account Min
$0
1 Minute Review

Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.

Webull is widely considered one of the best Robinhood alternatives.

Best For
  • Active traders
  • Intermediate traders
  • Advanced traders
Pros
  • Commission-free trading in over 5,000 different stocks and ETFs
  • No account maintenance fees or software platform fees
  • No charges to open and maintain an account
  • Leverage of 4:1 on margin trades made the same day and leverage of 2:1 on trades held overnight
  • Intuitive trading platform with technical and fundamental analysis tools
Cons
  • Does not support trading in mutual funds, bonds or OTC stocks

Forex Broker Comparison

Compare 3 of our highly recommended forex brokers in the chart below.

Account Minimum
$100
Pairs Offered
80+
Get started securely through FOREX.com’s website
Commissions
Spreads start as low as $1 But vary based on trading volume
Account Min
$250
1 Minute Review

FOREX.com is a one-stop shop for forex traders. With a massive range of tradable currencies, low account minimums and an impressive trading platform, FOREX.com is an excellent choice for brokers searching for a home base for their currency trading. New traders and seasoned veterans alike will love FOREX.com’s extensive education and research center that provides free, informative forex trading courses at multiple skill levels. While FOREX.com is impressive, remember that it isn’t a standard broker.

Best For
  • MetaTrader 4 users
  • Beginner forex traders
  • Active forex traders
Pros
  • Impressive, easy-to-navigate platform
  • Wide range of education and research tools
  • Access to over 80 currencies to buy and sell
  • Leverage available up to 50:1
Cons
  • Cannot buy and sell other securities (like stocks and bonds)
Best For
Options Trading
Overall Rating
Get started securely through TD Ameritrade’s website
Commissions
$0 $6.95 for OTC Stocks
Account Min
$0
1 Minute Review

This publicly listed discount broker, which is in existence for over four decades, is service-intensive, offering intuitive and powerful investment tools. Especially, with equity investing, a flat fee is charged, with the firm claiming that it charges no trade minimum, no data fees, and no platform fees. Though it is pricier than many other discount brokers, what tilts the scales in its favor is its well-rounded service offerings and the quality and value it offers its clients.

Best For
  • Novice investors
  • Retirement savers
  • Day traders
Pros
  • World-class trading platforms
  • Detailed research reports and Education Center
  • Assets ranging from stocks and ETFs to derivatives like futures and options
Cons
  • Thinkorswim can be overwhelming to inexperienced traders
  • Derivatives trading more costly than some competitors
  • Expensive margin rates
Best For
Global and Active Traders
Overall Rating
Get started securely through Interactive Brokers’s website
Commissions
Account Min
1 Minute Review

Interactive Brokers is a comprehensive trading platform that gives you access to a massive range of securities at affordable prices. You can buy assets from all around the world from the comfort of your home or office with access to over 135 global markets. Options, futures, forex and fund trading are also available, and most traders won’t pay a commission on any purchase or sale.  

IBKR is geared primarily toward experienced traders and investors but now with the availability of free trades with IBKR Lite, casual traders can also acclimate to IBKR’s offerings.

Best For
  • Access to foreign markets
  • Detailed mobile app that makes trading simple
  • Wide range of available account types and tradable assets
Pros
  • Comprehensive, quick desktop platform
  • Mobile app mirrors full capabilities of desktop version
  • Access to massive range of tradable assets
  • Low margin rates
  • Easy-to-use and enhanced screening options are better than ever
Cons
  • Beginner investors might prefer a broker that offers a bit more hand-holding and educational resources

What is Forex Trading?

The word “forex” is short for “foreign exchange.” Forex trading is the process of buying and selling different currencies. You might sometimes hear traders refer to forex trading as “currency exchange” or “FX trading.” Most countries issue their own currency. The value of each currency varies in relation to one another. If you’ve ever traveled abroad, you might have converted a small amount of cash into the country’s local currency and found that your money went further than it would at home.

For example, if you travel to Vietnam, you might find that a single U.S. dollar is worth over 23,000 Vietnamese dong. You might pay 5,000 Vietnamese dong (about 20 cents) for a bottle of water that would cost you $2 U.S. if you bought it somewhere in the United States.

Forex traders take advantage of this difference in value by strategically exchanging their native currency for foreign currencies. The goal of forex trading is to buy a currency when it’s undervalued and sell it when it rises in value in relation to the native currency. 

What is Stock Trading?

Stock trading involves buying and selling individual shares of a company, called “stock.” A share of stock is a small piece of ownership in a company. Like currencies, shares of stock can fluctuate in price throughout the day, week and month. Factors like a company’s management team, the overall state of the economy and the business decisions the company makes can all influence what each individual share of stock is worth.

Stock traders aim to buy a stock when it’s undervalued and sell it when it rises in value. There are 2 main types of stock traders who exchange stocks for profit:

  • Active traders are stock traders who attempt to time the market on a month-to-month basis. They may place 10 or more trades a month, and they may hold their stocks for weeks at a time before they decide to sell. Most active traders consider things like the board of directors and the future of the company when they decide which stocks to buy and sell.
  • Day traders are stock traders who take advantage of short-term price movements. Most day traders don’t hold onto their shares of stocks for more than 1 or 2 days at a time. Many day traders sell their stocks a few hours after they buy them. Day traders don’t usually care about the inner workings or boards of the companies they buy shares from — they only care about the volatility and daily fluctuations of these particular companies. 

Similarities Between Stock Trading and Forex Trading

Stock trading and forex trading are similar in a few ways. Let’s take a look at some of the similarities between these 2 common trading arenas.  

Brokerages

A broker buys or sells an asset on your behalf in exchange for a small fee or commission. Both stock trading and forex trading use brokers to facilitate your transactions. You can quickly create a brokerage account online and begin trading as soon as you fund your account.  While most U.S. brokerages will offer access to the stock market, not every broker services forex transactions. To learn more about brokerages that offer access to forex trading, check out our list of the top forex brokers

Best For
Futures Trading
Overall Rating
Get started securely through TradeStation’s website
Commissions
$0
Account Min
$0
1 Minute Review

TradeStation is for advanced traders who need a comprehensive platform. The brokerage offers an impressive range of investable assets as frequent and professional traders appreciate its wide range of analysis tools. TradeStation’s app is also equally effective, offering full platform capabilities.

Best For
  • Advanced traders
  • Options and futures traders
  • Active stock traders
Pros
  • Comprehensive trading platform and professional-grade tools
  • Wide range of tradable securities
  • Fully-operational mobile app
Cons
  • Confusing pricing structure to leave new traders with a weak understanding of what they pay
  • Cluttered layout to make navigating TradeStation’s platform more difficult than it should be
Best For
Options Trading
Overall Rating
Get started securely through TD Ameritrade’s website
Commissions
$0 $6.95 for OTC Stocks
Account Min
$0
1 Minute Review

This publicly listed discount broker, which is in existence for over four decades, is service-intensive, offering intuitive and powerful investment tools. Especially, with equity investing, a flat fee is charged, with the firm claiming that it charges no trade minimum, no data fees, and no platform fees. Though it is pricier than many other discount brokers, what tilts the scales in its favor is its well-rounded service offerings and the quality and value it offers its clients.

Best For
  • Novice investors
  • Retirement savers
  • Day traders
Pros
  • World-class trading platforms
  • Detailed research reports and Education Center
  • Assets ranging from stocks and ETFs to derivatives like futures and options
Cons
  • Thinkorswim can be overwhelming to inexperienced traders
  • Derivatives trading more costly than some competitors
  • Expensive margin rates
Best For
Intermediate Traders and Investors
Overall Rating
Get started securely through Webull’s website
Commissions
$0
Account Min
$0
1 Minute Review

Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.

Webull is widely considered one of the best Robinhood alternatives.

Best For
  • Active traders
  • Intermediate traders
  • Advanced traders
Pros
  • Commission-free trading in over 5,000 different stocks and ETFs
  • No account maintenance fees or software platform fees
  • No charges to open and maintain an account
  • Leverage of 4:1 on margin trades made the same day and leverage of 2:1 on trades held overnight
  • Intuitive trading platform with technical and fundamental analysis tools
Cons
  • Does not support trading in mutual funds, bonds or OTC stocks
Account Minimum
$100
Pairs Offered
80+
Get started securely through FOREX.com’s website
Commissions
Spreads start as low as $1 But vary based on trading volume
Account Min
$250
1 Minute Review

FOREX.com is a one-stop shop for forex traders. With a massive range of tradable currencies, low account minimums and an impressive trading platform, FOREX.com is an excellent choice for brokers searching for a home base for their currency trading. New traders and seasoned veterans alike will love FOREX.com’s extensive education and research center that provides free, informative forex trading courses at multiple skill levels. While FOREX.com is impressive, remember that it isn’t a standard broker.

Best For
  • MetaTrader 4 users
  • Beginner forex traders
  • Active forex traders
Pros
  • Impressive, easy-to-navigate platform
  • Wide range of education and research tools
  • Access to over 80 currencies to buy and sell
  • Leverage available up to 50:1
Cons
  • Cannot buy and sell other securities (like stocks and bonds)

Short-Term Trading 

Both forex traders and stock traders rely on relatively short-term trading strategies. A stock trader who’s trading with the intent to make a profit usually won’t be interested in holding onto his or her stock for years to come. Similarly, a forex trader only wants to hold currency until he or she can exchange it for a profit in his or her base currency.  

Technical Analysis

Technical analysis is a type of financial analysis that uses patterns and indicators to inform a trader when he or she should buy or sell an asset. Traders who use technical analysis to inform their trading strategy typically don’t spend a lot of time reading the news or researching a company’s business plan. Instead, they may look at candlestick charts for indicators that a stock or currency will drop or rise in price soon.

Both forex traders and stock traders primarily rely on technical analysis when they decide what they should buy or sell. Because the price of a stock or currency may change on a minute-to-minute basis, it’s important that you have a reliable technical analysis program to inform your trading. 

Differences Between Stock Trading and Forex Trading

Forex trading and stock trading also have a number of key differences you need to understand. Let’s take a look at some of the largest differences. 

Leverage

In the world of trading, “leverage” is the power to open a position that’s larger than the capital in your account. You might hear some traders refer to using leverage as “trading on the margin.”

Leverage is usually expressed as a ratio. For example, let’s say that you have $100 in your brokerage account and your broker offers you 100:1 leverage. This means that for every $1 in your brokerage account, you can trade with the power of $100. If you have $100 in your account and 100:1 leverage, you can place a trade worth as much as $10,000.

Leverage is a crucial part of forex trading because currencies usually don’t see massive fluctuations in price. It’s normal for a currency to increase in value by just $.0003 in a whole day. This means that you’ll typically need at least $100,000 to invest to see any type of significant profit on your trades. Leverage makes it possible to profit on forex trades without having hundreds of thousands of dollars to invest. On the other hand, leverage is also risky and can quickly wipe out your deposit if you don’t make smart trades.

Leverage is rarer on the stock market. You may only be able to find 2:1 leverage with many brokers. However, stocks also move in value more dramatically, which means that you need to invest less to see a profit. 

Trading Hours

The forex market isn’t centered around a single time zone or set of hours. Each forex market has its own hours of operation. Let’s take a look at when a few of the world’s largest stock markets are open.

  • New York opens at 8 a.m. EST and closes at 5 p.m. EST.
  • Sydney opens at 5 p.m. EST and closes at 2 a.m. EST.
  • Tokyo opens at 7 p.m. EST and closes at 4 a.m. EST.
  • London opens at 3 a.m. EST and closes at noon.

You can see the highest liquidity when trading hours overlap. However, the forex market is technically open 24 hours a day except on the weekends because there’s a global demand for currency that isn’t limited to a single time zone. 

When most people talk about stock trading, they’re referring to trading on the New York Stock Exchange (NYSE), the largest exchange in the world. The NYSE is open from 9:30 a.m. EST to 4 p.m. EST Monday through Friday. The NYSE is closed during the weekends, and it’s also closed during major American holidays (like Christmas and Labor Day). 

Market Size

Many traders prefer the forex market thanks to its massive daily trading volume. Every day, the forex market sees about $5.1 trillion worth of trades. This makes the forex trading market the largest exchange in the world by far.

The stock market is significantly smaller than the forex market. The NYSE sees about $169 billion worth of trades each day it’s in operation. Though this number doesn’t include the daily trading value of foreign markets, the stock market still pales in comparison to the size of the forex market. 

Pros and Cons of Stock Trading

Before you decide to start stock trading, be sure you consider the pros and cons of entering the market.  

ProsCons
Easier to get started. Almost every brokerage in the United States offers some form of trading on the NYSE. This means that you’ll have more choices when it comes to your broker and more control over which platform you use.

A massive number of stocks to trade. There are currently more than 2,000 different stocks listed on the NYSE and more than 3,000 stocks listed on the NASDAQ. This gives you plenty of options when it comes to choosing where to invest your money.

Higher volatility. As a general rule, stocks tend to be more volatile than currencies. It’s normal for a stock to rise or drop up to 5% in value each day, while a currency may rise or fall by only a fraction of a penny. This allows you to earn more of a profit without using leverage. 
Pattern day trading laws. The stock market is regulated by the Securities and Exchange Commission (SEC), which regulates who can trade and when. Under SEC rules, only traders who have a portfolio balance of $25,000 and above can place more than 3 day trades a week.

Limited hours. The major stock exchanges are only open on weekdays from 9:30 a.m. to 4 p.m. If you live outside of the United States (or on the West coast) you might have trouble finding time to trade during the most volatile parts of the day. 

Pros and Cons of Forex Trading

Forex trading also comes with a number of unique pros and cons.  

ProsCons
Fewer trading options. Are you overwhelmed by the number of stocks available to trade? There are only a few major currency pairs so you can compare all of your options.

Lower financial bar for entry. Unlike stock trading, there’s no legally regulated minimum balance you need to get started. When you take leverage into account, it’s possible to get started with as little as $50.

More liquidity. In order to sell a share of stock, someone else on the market needs to want to buy it. Most forex transactions are filled instantly thanks to the massive daily trading volume and near-constant demand of the currency market. 
Danger of leverage. Leverage can be a powerful trading asset, and it’s almost always a necessity to trade forex. However, leverage can also quickly wipe out your initial deposit if you make a single bad trade.

Fewer platform options. Not every brokerage firm offers forex trading. This means that you may have limited options for which platform you can use. 

Choose Between Stock and Forex Trading

Whether you decide to start stock trading or forex trading, you want to make sure that you have a strong technical analysis background. Both forex trading and stock trading rely heavily on short-term price movements, so an up-to-the-minute charting software is an absolute must-have. Be sure to learn more about how you can get free forex charting software or the best stock trading software before you invest your money. 

Frequently Asked Questions

What are the risks of forex trading compared to stocks?

1
What are the risks of forex trading compared to stocks?
asked
1

Stock trading uses fundamental research such as earnings to predict changes in prices. Forex is affected by geopolitical events, changes in monetary policy, country-specific issues and economics.

answered

Does stocks or forex have the highest amounts of volatility?

1
Does stocks or forex have the highest amounts of volatility?
asked
1

Stocks have higher amounts of short-term volatility than forex.

answered

Get a Forex Pro on Your Side

FOREX.com, registered with the Commodity Futures Trading Commission (CFTC), lets you trade a wide range of forex markets plus spot metals with low pricing and fast, quality execution on every trade. 

You can also tap into:

  • EUR/USD as low as 0.2 with fixed $5 commissions per 100,000
  • Powerful, purpose-built currency trading platforms
  • Monthly cash rebates of up to $9 per million dollars traded with FOREX.com’s Active Trader Program

Learn more about FOREX.com’s low pricing and how you can get started trading with FOREX.com.

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