Differences Between Forex and Stock Trading
One most of the biggest misconceptions about foreign currency exchange (FOREX) is that its just like trading stocks. In that couldn't be further the truth. Although these two types of trading share similarities in the process, the stock and foreign currency exchange markets are too much different, and each the market has its own unique rules.
If you entering foreign currency exchange trading with a background in equities, it's very important to recognize these differences. Theirs reason: Due to these differences, the trading styles for stocks and foreign currency exchange are very different. Here is some of quick look at some of these major differences:
The Forex market is biggest in the world, and this estimated as much as $5 trillion changes hands in per day. It's on overall global marketplace too. Theirs traders and investors taking part in the market all over in world. This is a big difference than stock markets - which are the limited by market volume,also the country of origin and market activity.
The stock markets are prone to hitting down the time periods, and this can be detrimental to traders. Shrinking volumes and decline of activity can make it to much more difficult to open/close a trade.In Forex, traders can make profit in up and down markets, because of the large liquidity and huge volume of the market participants.
The Forex markets are primarily evaporated on 8 currencies pairs - four major pairs, as well as the commodity pairs. Many traders are focus on their efforts on these currency pairs, often are concentrating on just a couple. This greatly reduces of the amount on time that needs to be spent on analysis in forex market. In the stock market, thoughts, is made up on 1000s of stocks. It's more difficult to traders of locate fast-moving stocks, research all the options are available to them, and determine trading position because there are so much more stocks to look at.
Another difference: For leverage is much higher in Forex trade due to the high liquidity in these markets. Thats mean margin-trading is more feasible. For example, in stock markets, typically on leverage about 2:1. That means a trader must put up at least 50 percent of the trading amount to enter the position. In Forex trade, leverage can be 50:1 puts up 500:1, meaning the trader can make larger trades in fewer funds with their margin account.
Finally, the Forex market is a really global marketplace in the world. Its opened 24 hours in a day and it moves in cycles based on in market opens the different regions.
6. What's more
This is over-the-counter market, which means thats take place between brokerages, All traders and investment banks. Stock markets though are open for set hour and their carried out in specific location like the New York Stock Exchange.