Let’s consider the differences between instruments traded when trading stock VS trading Forex.
Obviously the nature of the instruments being traded between stock trading and Forex trading is quite different. In the stock market, a trader will buy or sell a share of a specific company in a certain country. There are several stock markets in the world, and these markets are affected by different factors including the local situation of the country to determine the valleys and peaks of the prices of stocks.
Forex trading, on the other hand, involves purchasing and selling pairs of currency. In a Forex market transaction a trader will usually buy one currency from one country, and then would sell the currency from another. Hence, the transaction is referred to as an exchange.
Forex traders generally estimate the rise and fall of the currency trades betting on the monetary policy of a specific country as well as the economic perspectives. These factors affect the difference between the two currencies in the currency pair.
While the stock market is managed by established governing bodies, Forex trading is facilitated by financial institutions operating on certain levels. Banks may form smaller financial firms to serve as Forex dealers to focus on exchanging large amounts of currencies. Because of the issue of sovereignty between two currencies on exchange, the market is less regulated and so more flexible compared to stock trading.