Why The Forex Market Is Different From The Stock Market

Best Growth Stock – Many of you are wondering what is all the buzz about trading currencies in today’s market. One of the most commonly traded vehicle in today’s economy is the forex market. It is many times referred by professionals simply as the FX market. In essence this market is the exchange of currencies between individuals. You might be asking yourself, why someone want to exchange or buy others country currencies. MONEY! Yes, it is always about the money you can make. This market was established more than 40 years ago (since we wrote this article in 2008). For the early 70s a group of bankers decided to exchange currencies. It worked very simple I will exchange you my currency for a price. Making small profits on each transaction growed to be a multimillion dollar industry. Since only a fraction of a profit is made, the forex market needs millions of transactions. Just compare how big is the stock exchange every day and it does not compare to the size of the forex market. OH, I we forgot to mention that it is running 24 hrs a day.

There are millions of dollars that are traded daily on the currency market on a daily basis. The capital that flows through the exchange is not even comparable to the money that flows through the new york stock exchange. What really is exciting about this market? It involves the micro and macro economics of the entire planet. Take into consideration how a financial crisis in one country can devalue the currency of an entire block of currencies vs other currency baskets. The currency market is one that involves governments, banks, financial institutions and those similar business from other states and countries. The good news about the forex market is that you are trading money and it means you are dealing with cash and fast money.

Currency Market

From one currency to another, the supply of cash in the currency market is something that may occur fast for any investor from any country. You might be asking yourself, What is then the main difference between the stock market and the foreign exchange market? Well, quite complicated by one side due to the complexity of the foreign market but easy by the other side due to the fact that you are dealing with a worldwide market. For example, you might have heard that what happens in Vegas, stays in Vegas right? Well, what happens in the stock exchange stays in the stock exchange. The same applies to the foreign market and the stock exchange. What happens in the forex market will never stay in the forex market, it will go around the world faster than the speed of light.

The stock market is reliant on enterprises and products that are inside a country, and the foreign exchange market takes that a stage further to incorporate any country. Usually , the stock exchange follows the working day, and may be closed on banking vacations and weekends. The foreign exchange market is one that’s open sometimes 24 hours a day because the huge number of countries that participate in the market by purchasing and selling a large amount of currencies in different times areas. As one market is opening, another states market is closing. This is the continuous technique of the way the currency market trading happens. The stock market in any country is going to be based mostly on only that nations currency, say as an example the Japanese yen, and the Japanese Nikkei, or the Wall Street and the Dollar.

One special advice to all of you interested in the forex market. Keep an eyes into today’s politics as it may hit your wallet hard. In the currency market, you must be concerned about politics at other nations and world wide events that may affect any country you are investing in. As an investor you will find references to a spread of currencies, and this is a large difference between the stock exchange and the currency market.