Stock and forex both fall under the banner of securities trading. Both are easy to get involved in, and the investment potential is high, so it’s no wonder people want to find out about how they can get started. Both stock and forex traders typically work with brokers, and most brokers offer services for both types of traders.
Stock Trading in the UK
Here are some key characteristics of stock trading in the UK
Stockbroker fees tend to be higher than those on offer with forex accounts because there is more regulation surrounding stock trading in most countries. This is one area where you need to shop around as some brokers will charge less than others, mainly if you are prepared to do business online rather than via telephone or fax.
You will generally have to meet specific requirements before being allowed to open a stock trading account. This may include making an initial deposit of up to £1,000 with your broker, submitting proof of identity and proof you earn above a certain level.
Minimum investment/trade size
Most online brokers will let you trade small e-mini stocks for as little as $5, but the minimum required by larger shares can be much higher – running into thousands even for one share! The Minimum for forex traders tends to be$10, but this is often waived for minimal amounts.
Stock accounts sometimes come with ‘lock-in’ periods where you cannot withdraw your money for a certain period – usually between six months and one year. Forex traders don’t have to worry about this, which means they can plan their trades around current market conditions that might change in the future.
Both stock and forex trading usually involves commissions when you enter or exit a trade, but most brokers will waive these charges if you are a frequent trader, e.g. making more than a certain number of trades each month.
Forex Trading in the UK
Here are some key characteristics of forex trading in the UK
As mentioned earlier, forex brokers often have very low fees, which is one of the key benefits of trading on this platform. Many brokers will even charge traders nothing – or just a small fee per trade – if they generate a certain number of transactions each month. Of course, this works both ways because some stockbrokers offer commission-free trading to their most productive clients.
Once again, there is greater flexibility in opening accounts with forex brokers because no financial information needs to be submitted. This is not to say that brokers do not carry out checks, but they will typically only request information such as your name and address and an email address for contact purposes.
Minimum investment/trade size
There are no minimums with forex trading because there is no maximum! Investors and traders alike can participate in the market whenever they want, so long as their broker has a dealing desk open. If you trade stocks, you will likely only buy single shares, e.g. £1,000 worth of Apple stock would mean buying 20 separate 100p pieces.
Stockbrokers may require that you hold on to your stocks for a certain period – often between 30 days and one year. In contrast, there are no such regulations for holding forex positions because you can hold a position ‘forever’ if you want.
With stocks, the entry cost is usually the price of the shares themselves, but forex traders don’t have this restriction in most cases because they will typically use contracts for difference (CFDs). These types of derivatives mean that there is no need for your broker to maintain an ‘inventory’ of currencies which means they won’t charge anything to enter or exit a trade.
New traders who want to trade stocks or forex are advised to use a reputable online broker from Saxo Bank and trade on a demo account before investing real money. For more information, see it here.