The way to trade forex and stock markets
The main difference between the two financial markets comes from the way they are traded. To be more exact, stock market trading has some limitations that are not seen on the Forex market. To start, when trading stocks, it is not possible to sell a stock, unless you already own it. This sounds only normal, but on the Forex market, one can sell a currency pair without owning it. In other words, you can go short EURUSD, for example, on the Forex market, and if the currency pair is moving South, you can bank on that move and make a profit by covering the short (hence closing the position with a long) at lower levels. This is not possible on the stock market. The only way to sell a stock is to own it. This means, you must buy it first, and if it moves against you, you can sell it but in a loss. If it moves up, you can sell it for a profit. But you must own it first, and this makes for different trading strategies to be in place for the stock and Forex market.
Have you never heard of shorting stocks?
Of course you can sell stocks that you don't own. You effectively "borrow" the stocks from "A" to sell. When it is time to settle, you then buy the stocks to pay back to "A" that you borrowed them from.
Similarly in Forex. You borrow one currency to buy another, when it is time to settle, the deal is reversed and you pay back the currency that you borrowed.
Have you never heard of shorting stocks?
Of course you can sell stocks that you don't own. You effectively "borrow" the stocks from "A" to sell. When it is time to settle, you then buy the stocks to pay back to "A" that you borrowed them from.
Similarly in Forex. You borrow one currency to buy another, when it is time to settle, the deal is reversed and you pay back the currency that you borrowed.
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
You agree to website policy and terms of use
The main difference between the two financial markets comes from the way they are traded. To be more exact, stock market trading has some limitations that are not seen on the Forex market. To start, when trading stocks, it is not possible to sell a stock, unless you already own it. This sounds only normal, but on the Forex market, one can sell a currency pair without owning it. In other words, you can go short EURUSD, for example, on the Forex market, and if the currency pair is moving South, you can bank on that move and make a profit by covering the short (hence closing the position with a long) at lower levels. This is not possible on the stock market. The only way to sell a stock is to own it. This means, you must buy it first, and if it moves against you, you can sell it but in a loss. If it moves up, you can sell it for a profit. But you must own it first, and this makes for different trading strategies to be in place for the stock and Forex market.