{"id":2413,"date":"2021-05-21T13:22:00","date_gmt":"2023-03-31T20:19:17","guid":{"rendered":""},"modified":"2023-12-20T08:17:52","modified_gmt":"2023-12-20T08:17:52","slug":"stocks-vs-forex-a-quick-comparison","status":"publish","type":"post","link":"https:\/\/blog.zulutrade.com\/fr\/stocks-vs-forex-a-quick-comparison\/","title":{"rendered":"Stocks vs Forex: A Quick Comparison"},"content":{"rendered":"

The two most well-known and most traded markets in the world.<\/span>
<\/span>Two different worlds of trading colliding in the battle of which is the most “shinny” one.<\/span>
<\/span>And it is a common question in the investor cycles.<\/span>
<\/span>“Which is the best market to trade?”<\/span>
<\/span>
<\/span>Frankly, this question cannot be answered as there are dozens of different investor profiles with different preferences and needs.<\/span>
<\/span>What we can do is dive deeper into the inevitable comparison of Stocks and Forex.<\/span><\/p>\n

Products included<\/em><\/strong>
<\/em><\/strong>Stocks:<\/span> Whichever company is appropriately regulated can offer its stock to the relevant sector. This includes from the small-cap Biotech penny stock to the large-cap multi-billion dollar in capitalization Banking stock. The value relationship is always between the country’s currency and the present evaluation of the smallest friction of a company’s capitalization. (i.e JnJ=170$)<\/span>
<\/span>
<\/span>Forex:<\/span> All the currency pair crossings available in the modern banking system. Divided into 3 categories with major, minor and exotic ones. Pretty self-explanatory, the analogy between two countries’ (or Unions’) currencies. I.e (EUR\/USD=1.21200)<\/span>
<\/span><\/em><\/strong><\/p>\n

Volatility and Trend<\/em><\/strong>
<\/em><\/strong>Maybe the most desired attribute of an investment.<\/span>
<\/span>It’s “moving potential”.<\/span>
<\/span>“How far can it go?”.<\/span>
<\/span>This is divided into two subcategories.<\/span>
<\/span><\/p>\n

CopyTrade with ZuluTrade<\/a><\/p>\n

Volatility and Trend tendencies.<\/span>
<\/span>As volatility,<\/span> we identify the average price’s fluctuations on a specific time frame.<\/span>
<\/span>Additionally, by the definition “trend tendency”<\/span> we are describing at which extent a product is trending, meaning moving in the same direction without reversing to its mean.
<\/span>
<\/span>In order to achieve a realistic and vivid comparison, we chose two products to represent each sector.<\/span>
<\/span>Apple (AAPL) for stocks and EUR\/USD for Forex.
<\/span>\"\"
Apple has been one of the best performing tech giants in the last 2 decades. With a highest yearly ROI of more than 200% and an average of above 50%, Apple has been really generous with its investors and thus won many “loyal fans” along its journey.
\"\"
On the other hand, Eur\/Usd’s highest year in volatility is a little over 20%. While the average year’s fluctuation is around 10%.
<\/span>We are talking about the 1\/6th of potential in comparison with Apple stock.<\/span>
<\/span>This is a big difference.<\/span>
<\/span>Many people will state the existence of higher leverage to forex products rather than stocks, however, this is not always the case and even if it is sometimes, it does not negate the fact that even with higher leverage one should implement a “buy and hold” strategy for a currency pair which is against conventional investment wisdom.<\/span>
<\/span><\/span><\/p>\n

CopyTrade with ZuluTrade<\/a><\/span><\/span><\/p>\n

Having inspected the magnitude of volatility, we are now moving on to the trending of the products.<\/span>
\"\"<\/p>\n

Here we can see for how many consecutive years the stock had the same direction, either upwards or downwards. It is obvious that Apple is a product that trends a lot, thus providing the investor an environment with bigger momentum thus higher confidence in his position.
\"\"

On the contrary, in the EUR\/USD we can identify a sideways market. As the years go by, Eur\/Usd ends up nowhere and tends to reverse to average prices.<\/span><\/em><\/strong>
<\/span><\/p>\n

This can confuse the investor many times and cause uncertainty about the outcome of a position.<\/span>
<\/span><\/em><\/strong><\/p>\n

Liquidity and “Hotness”
This is something that might confuse a lot of readers.<\/span>
<\/span>Liquidity does not always equal how widespread a specific product is.<\/span>
<\/span>A product can be in every “hot” news<\/span> available at the time but the investor would not be able to participate in the buying or selling action.<\/span>
<\/span>Since liquidity<\/span> is by definition the ease with which an asset, or security, can be converted into ready cash without affecting its market price, we must separate the two characteristics.<\/span>
<\/span>
<\/span>The Stock Market<\/span> is one of the most liquid markets in the world. Billions of dollars are being exchanged for a specific stock each day. Stocks are now available with “one-click” trading, without having to pick up the phone and place an order verbally to your stockbroker.<\/span>
<\/span>As much as it concerns their “Hotness”, one can simply not deny that every day we are expecting a news story for a stock that broke its new highs, or one that collapsed due to failed earnings, or a scandal with a board member. Whatever is the excuse behind it, numerous stocks offer thrilling moves both on the upside and on the downside.<\/span>
<\/span>
<\/span>With over 5 trillion dollars per day, <\/span>the currency market<\/span> is by far the most liquid trading sector in the world. And rightfully so, as the fundamental value of all products is derived by the relevant currency that it’s tied to.<\/span>
<\/span>Now for its notoriety, forex has proven many times that it can not only create news buzz around it but also cause massive events that will never be forgotten(i.e  EUR\/CHF flash crash)
<\/span><\/p>\n