forex vs stocks which is more profitable

porting a successful stock trading strategy to the foreign exchange market can result in massive profits, but also huge losses
when comparing forex vs stocks, one of the first things a trader considers is volatility
the classical definition of volatility refers to the magnitude of an asset’s price movements
but when forex vs stocks, perhaps a better definition is the price movement itself — i.e. The probability that the price of a currency pair will move between 0.5% and 5% against the U.S. dollar
no doubt this also correlates with the magnitude of such moves
as you’d expect, JPMorgan’s Forex Broker’s & Dealers Data Report found the Japanese yen to be the most volatile currency in March 2020
It was followed by the Brazilian real, South African rand, Mexican peso and Indian rupee
whilst slow-moving currencies include the U.S. dollar  + Czech koruna + Norwegian krone + South Korean won
when comparing forex vs stocks, volatility is not the only factor to consider
the average one-year return on the MSCI All Country World (ex USA) Index was 12.9% in March 2020
this was significantly higher than the average one-year return of 9.8% on the S&P 500 Index over the same timeframe
although the S&P had a higher annualized rate of volatility (18.9%) than the global stock market index (14.5%)
the numbers suggest a more successful stock trading strategy when compared to foreign exchange trading
or put another way — lower volatility and higher returns with less risk
this is certainly not a one-size-fits-all conclusion however
the one-year success rate of 41.3% on the E-minium 100 Index (a futures market based on commodities) was significantly higher than  the S&P 500’s 15.7%
this was despite the fact that the volatility of the E-minium was double that of the S&P (30.6% vs 14.5%)
so it’s fair to say that both Stock and Forex traders need to consider their goals — as well as the underlying market they’re trading
before jumping headfirst into a strategy
the upside of volatility
the flipside of having a higher volatility index is that returns can be sustained for much longer periods of time
think bull and bear markets
the MSCI All Country World (ex USA) Index enjoyed a bull market for nearly 5.5 years and a bear market for just over 3 years and 8 months
during the same timeframe, the S&P 500 endured a bull market for just over 3 years and a bear market for nearly 6 and a half years
this longer bear market survival period  allows stock traders to endure multiple dips and climbs in the market before calling a bottom
this can be essential to reaching long-term success
although it should be noted that the stock market recovered much faster after the global financial crisis of 2008–09 than the global economy
this may have more to do with the structure and governance of stock markets than anything else
in spite of these advantages, many stock traders still don’t consider strategy as heavily as they should
according to one survey, 46% of stock traders trade without any kind of plan or system
A similar number (44%) trade purely on emotion
this obviously leaves a sizable group of stock traders (14%) who succeed with a combination of both logic and feeling
while many Stock traders may dabble in other strategies such as options or futures, most seem to prefer the direct approach of buying stocks
perhaps because it’s easier to recognize instant successes with this strategy than it is with  other strategies
the downside of owning individual stocks
the downside to owning individual stocks is that it can be a pricey endeavor
the initial investment to open a single stock account can be considerably less than the minimum investment required to trade futures or forex (which is known as currency margin) but it’s still a significant amount
for example the minimum required to open a Forex account is $250 (USD) but the minimum required to open a Yahoo Finance Stock Account is 5 times that at $1,000
buying individual stocks may seem like a sensible money management strategy but it can easily become pricey if you don’t keep your purchases in check
another potential hazard when it comes to buying individual stocks is that you’re putting your trust in the company’s leaders and managers to do the right thing
as such a stock trade purchase can be considered an illiquid investment in that it may take some time before the stock’  reaches a desirable price for sale
this liquidity issue can become a significant problem if you need to pull money out of your account quickly
likewise if you decide to aggressively buy into a rising stock (known as being long) the risk is that it could continue to rise indefinitely
if this is the case you could eventually be forced to sell the stock at a price that’s considerably below what it’s currently trading for
this is known as being squeezed
in other words the initial benefits of buying individual stocks (control and potential returns) are countered by volatility and limited liquidity
the exact opposite situation exists when trading stocks
exploiting the gap phenomenon to profit with Stock Trades
Unlike futures and forex trades which are executed instantly, stock trades are executed during market hours i.e. when the markets are open
this means there’s a period of time where the price of a stock doesn’t match its  intraday value
this mismatch in price occurs when the stock’s price is either:
less than its previous closing price (known as a DOWN gap)
or more than its previous closing price (known as an UP gap)
gaps occur for a variety of reasons but for our purposes we’ll say that most gaps occur as a result of the opening price not being exactly the same as the closing price
this means that when the markets open there’s naturally some speculative buying or selling since the closing price isn’t providing the appropriate market signal for traders and investors
trading the gap is a very specialized form of technical analysis that can be particularly profitable in a very short time
to illustrate how profitable gap trading can be consider the following example
assume you’ve identified a stock which has a typical down gap at market open and which resumes trading within a few points of its gap n