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Main differences between Forex and stocks - admin - 10-10-2020

The stock market in England first entered into operation in 1985 under the name of Istanbul Stock Exchange, ISE, and the first transactions began to take place on January 3, 1986. England investors have been trading continuously for 31 years in the stock markets, whose new name changed to in 2013. The Forex market, on the other hand, is a relatively new investment tool for England investors. The forex market, which has been rapidly developing and popular for the last 10 years, has become a favorite of investors with attractive trading conditions, easy access and a variety of products.

There are obvious differences between Forex and stocks. If you want, let's consider important differences with topics.

Liquidity and depth

Forex markets are the most liquid market in the world. The daily trading volume is 5.1 trillion dollars, so it is quite high in depth in the market. Leverage is the most important reason why the daily trading volume is so high. But Forex is an international over-the-counter market, so its participants are quite high. With high leverage, small investors of all levels can easily access the market. Leverage directly affects the growth of trading volume in the market. On the other hand, stock markets are an organized market. The depth and trading volume of all stocks traded in England stock exchange varies according to participation. The development and growth of the market depends on new accounts to be opened and on corporate and individual investors who will provide new participation. Each of the more than 500 stocks traded on the stock exchange does not have the same trading volume and depth. Shares with the highest trading volume usually consist of shares with certain criteria. Boards with strong depth are more preferred by investors. Due to the depth and high liquidity of forex markets, the likelihood of manipulation is almost minimal. But there may be a possibility of manipulation on some shallow boards with little depth and trading volume in stock markets.

Lever

There is no leverage in stocks relative to trading on the exchanges. Operations are performed in a ratio of 1 to 1. In other words, you need 5000 GBP to get 1000 lots of a stock with a price of 5 GBP. Even if there is no leverage in the stock market, the brokerage firm where your account is located may allow you to use special credit limits. This may vary depending on the customer relationship between you and the brokerage firm. A brokerage firm may allow some customers to use credit margins at the level of 1 to 2, 1 to 5, or 1 to 10. For example, a customer using a credit limit of 1 to 5 may have the same value size as 1000 GBP instead of 5000 GBP in order to have 1000 lots of A shares. On the other hand, in forex markets, leverage ratios in the system itself are obvious according to the customer's demand. All transactions of an investor who opens an account with a defined leverage ratio of 1:10 will be transactions with a leverage ratio of 1: 10. Therefore, instead of giving credit to the brokerage firm, the system itself gives this opportunity to the customer.

Product Variety

Forex markets mean Foreign Exchange, that is, foreign exchange. In recent years, a large variety of products have been created by adding new products to transactions on dozens of pairs created from country currencies in international foreign exchange markets. In addition to parity, many financial products such as stock market indices, stocks, commodities based on agricultural, energy and mining products under the CfD - contracts for difference Product Group are bought and sold by investors. Access to hundreds of products is not done for physical trading of investment products. The investor tries to make a profit on these products only by taking advantage of the price difference. Reaching such a wide range of products from a single platform is one of the important opportunities that attracts investors. In the stock market, the variety of products is limited only to stocks. Investors can easily invest whatever they want from hundreds of stocks that have different stories. In stock exchanges, some products have the possibility of physical purchase and sale. In addition, when the shares are owned, the investor has many rights. At the beginning of these, the company's dividend share, the right to receive new shares (rühçan), participation in the management of the company, voting rights, other important rights such as receiving information are granted.

Bidirectional Operation

Investors trading in the Forex markets simply need to determine the direction for the product they are trading. They can easily make money not only in a rising market, but also in a falling market. Therefore, if the investor opens a sales-oriented position in the transaction that he will open, the falls will give the investor a profit. Any product in the forex market can open a position in the direction of decline by pressing the Sell button very comfortably. Stocks also have the opportunity to make money in a falling market. Investors who invest in the downward direction take a position in the downward direction with the” short sale " process. But not every investor can make a short sale as easily as in Forex. Because he sells the stock that he does not have, and after the fall occurs, he returns the stock and puts it in its place. In order for this transaction to take place, the investor must borrow the amount of shares from the lending market of the brokerage firm in which he works. An investor who wants to make a short sale in shares must sign a short sale Framework Agreement.

Trading Hours

One of the most obvious differences between Forex and stock trading is trading hours. In exchanges where stocks are traded, transactions are usually restricted to session hours during the day. For many years, trading hours at Imbk have been limited to the morning session and the afternoon session after noon. Current trading hours in England are from 9:40 in the morning to 18:10 in the evening. In Forex markets, there are no restrictions on trading sessions. The Forex market is an OTC over-the-counter market, and because it is an international foreign exchange market, transcontinental transactions continue continuously throughout the day. Although transactions are divided into 3 sections as Asian session, European session and American session, transactions continue for 24 hours without stopping throughout the day. Forex Sunday Friday is the last trading day of the week, starting at 00:00 on Sunday night and ending at 24:00 on Friday night. Therefore, the Forex market is a 5/24 traded market.

Commissions

There is no Trading Commission in Forex markets. The investor's transaction cost is embedded in the Buy-Sell price. The spread, which is the difference between the buy-sell prices, faces the investor as the cost of the transaction. For an investor who purchases at the sale price, the head-to-head point is the purchase price, which the investor performs at the sale price. In addition to the spread cost at the purchase and sale prices in stock markets, the purchase and sale commission fees are reflected in the investor's accounts. In Old years, brokerage firms ' stock commissions were quite high. But over the years, commission rates have fallen to extremely reasonable levels. Currently, stock transactions can be made with low transaction costs with very attractive low commission rates.