Currently, the world's largest financial market is the foreign exchange market. This single market has an estimated volume traded of about US$5 trillion. Nearly 30% of that volume is traded in spot forex markets and even this is larger than some of the largest stock exchanges in the world. What makes this market so attractive to retail traders is its high liquidity, 24 hour five day week trading and leverages available to everyone in a level playing field.
On the other end of the spectrum is stocks. These instruments are what is traded in exchanges and each represents an ownership share over popular names in the market. Blue chip companies or stocks, represent a well-established value in a relatvely volatile market.
Trading is often done in specific hours, The foreign exchange market operates through interbank sytems that is done over the counter. Foreign markets open Sunday night GMT and closes on Friday evening GMT.
Leverage is an option to allow an individual trader to be engaged in larger positions and volumes. This allows traders to maximize their profits but there is a rejoinder that losses can also be quite a large sum, especially in volatile markets. In the United States, leverage ratios on stocks are 2:1 while leverage ratios for fore are 10:1.
Another major factor for consideration in trading either stocks or foreign exchange would be market volatility. Volatilty relates to the short-term price changes, which includes price fluctuations over given periods of time, The lesser the fluctuations, the more stable the instrument is in terms of value and pricing. Comparatively, foreign exchange tends to be more volatile compared to stocks, except for smaller capitalization stocks or so-called 'penny' stocks, Because of the leverage available and the rate of volatility, forex traders tend to earn more at a given time.
Leverage also plays a role on how traders can participate in markets that require lower capitalization requirements, Thus in comparison, a forex trader can start work with as little as US$25 in some markets while on the other hand, large financial backing is needed in order to earn and payout in the stock exchange
