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The Difference Between Forex and Stock Markets


Trading on Forex and stock markets are two very different things, each requiring different strategies. There are also advantages and disadvantages to both markets which should be considered before starting to trade in either.

There is a fundamental difference between the two markets related to what is actually being bought and sold. When trading on the stock market you are buying and selling shares of individual companies, whereas in Forex you are buying and selling different countries’ currencies. On the Forex market, you aren’t buying anything physical but actually money itself. Some common currencies that are commonly traded include the US dollar, Great British pound, Japanese Yen, the Euro and the Swiss Franc.

Because of this fundamental difference, stock markets usually trade in shares of businesses that are specific to a certain country, which is why there are different markets around the world. As Forex is a global market, it has a much greater reach that includes almost every country on Earth without having anything to do with individual companies or organizations.

The most striking difference between Forex and stock markets is that Forex trades a much greater amount of money every day than any of the stock or future markets. On average, the Forex market trades $4 trillion dollars each and every day, dwarfing any other market on the planet. This makes it an extremely attractive proposition for establishments such as banks and other financial institutions, and as such they make up the major players of the Forex market. It is also what attracts hundreds of thousands of private traders from all around the world.

Another big difference is that trading on Forex can take place all day, every day, apart from a short break each weekend. This is because Forex is a global market, and hence “follows” the daytime around the world, usually starting in Australia. For this reason Forex traders can react to any changes immediately without having to wait for the market to open in the morning. The only exception to this is a few hours every weekend when the market is closed.

One advantage of Forex trading is that when you place an order or make a trade it happens instantly. With stock markets, there is often a delay between placing an order and the order going through which can cause a lot of problems. This also means when monitoring the Forex market, the data you see is in real time, which makes trading a lot more reliable even if the market in particular is unstable at a certain time.

Other things that make Forex unique compared to other markets include the much larger numbers of people involved, the wider range of possible factors that can affect the market prices and the sheer volume of trades each day. To become a successful Forex trader, it is important to understand that there are many different factors that don’t necessarily affect stock markets which can change currency rates quickly. These can include economic factors such as inflation levels and interest rates, political situations such as a change in a country’s diplomatic relations and numerous other things.

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