Why The Foreign Exchange Market Is Different From Stock Markets
The foreign exchange market is also known as the FX market. Trading that takes place between two countries with different currencies is the basis for the FX market. The forex market is over thirty years old, established in the early 1970's. The forex market is one that is not based on any one business or investing in any one business, but the trading and selling of currencies.
The difference between the stock market and the forex market is the vast trading that occurs on the forex market. There is millions and millions that are traded daily on the forex market, almost two trillion dollars is traded daily. The amount is much higher than the money traded on the daily stock market of any country. The forex market is one that involves governments, banks, financial institutions and those similar types of institutions from other countries.
What is traded, bought and sold on the forex market is something that can easily be liquidated, meaning it can be turned back to cash fast, or often times it is actually going to be cash. Exchanging one currency to another makes the availability of quick cash profits appealing to investors.
The difference between the stock market and the forex market is that the forex market is global, worldwide. The stock market is something that takes place only within a country. The stock market is based on businesses and products that are within a country, and the forex market takes that a step further to include any country.
The stock market has set business hours. Generally, this is going to follow the business day, and will be closed on banking holidays and weekends. The forex market is one that is open generally twenty four hours a day because the vast number of countries that are involved in forex trading. The FX market in the United States opens on Sunday at 5:00 p.m. and closes on Friday at 5:00 p.m. However, FX exchange markets are located in so many different times zones that as one market is opening, another market is closing. This is the method of how the forex market trading occurs.
In the FX exchange currencies are traded in pairs. In the stock market an actual investment is made in the company.
The stock market in any country is going to be based on only that country's currency, say for example the Japanese yen, and the Japanese stock market, or the United States stock market and the dollar. However, in the forex market, you are involved with many countries, and many currencies. You will find references to a variety of currencies, and this is a big difference between the stock market and the forex market.
I Hope This Helps.
Eric
About the Author
The author lives at the Crystal Coast of North Carolina. His interests include internet marketing, fishing, digital photography and diving.
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