If you’re new to foreign exchange, or forex, as it is commonly known, you’re probably wondering what makes it different from stock exchanges. Forex is both similar and different to stock exchanges. Here are some of the main differences:
Unlike the stock market, where money is traded for shares in a company’s stock, Forex is all about trading one type of currency for another. In both markets, you make money by following the same principle: buying low and selling high. However, the forex market differs from the stock market in that going long (betting on a rising price) or short (betting on a falling price) is equally easy.
You may have experience as a forex trader and not even know it: anyone who has traveled to another country and exchanged their home currency for the local currency has traded forex! Of course, the global forex market operates on a much larger scale, involving importers and exporters, multinational corporations, portfolio managers, hedge funds, and speculators. Some of these players are doing business in other countries, some are hedging one currency against another in order to prevent losses, and some are engaged in currency speculation – trying to predict and profit from favorable currency movements.
The forex market is one of the most exciting and trader-friendly markets in the world. Here are some other useful facts to know if you’d like to become a forex trader.
The Forex Market is Huge: Thanks to its sheer size, it is almost impossible for any one person, institution or government to control the forex market for long. At an estimated $3.98 trillion plus, the average daily turnover of the forex market easily trumps that of the New York and London Stock exchanges put together.
The Forex Market Offers 24/5 Accessibility: Forex trades can be made 24 hours a day, 5 days a week. The market runs non-stop from 20:15 GMT on Sunday until 22:00 GMT on Friday.
The Forex Market has Unrivaled Liquidity: With its massive scale and 24/5 accessibility, forex is exceptionally liquid, making entering and exiting even very large positions comparatively simple. With massive corporations and central banks trading forex, there’s plenty of room for you, too!
There is No Central Control in Forex: Forex has no centralized market or regulatory control. The Internet makes it easy to participate in forex via computers linked to brokers, banks and other traders around the world. Regulation is administered locally wherever banks and brokerages are registered, which means you enjoy the protection of local regulatory authorities without the limitations of central control.
Forex Offers Unparalleled Leverage: Forex allows you to make big profits while risking small amounts of money. Here at “Market Investment” you can trade with leverage as high as 1:200 if you want. But you don’t have to gear your trades that high if you prefer lower levels of risk.
Forex is Open to Everyone: The forex market was once the domain of institutions and wealthy individuals. Thanks to the Internet, all that has changed.