The foreign exchange market might seem very
similar to other financial markets to some people. On the surface, the forex exchange has many
similarities to the stock exchange. Howev
er, there are a number of differences. Below is a
breakdown of some of the major differences that might not be obvious to
everyone.
The Marketplace
The stock market is a centralized market, meaning that it is located mainly in one place: the New York
Stock Exchange (NYSE). All trades enter and exit from that location. Forex is
not centralized, and is considered an over-the-counter (or OTC) exchange.
Trading Hours
The stock market is operated on a strict schedule.
So is the forex market. However, the stock market operates for 8 hours per day
and then shuts down. Traders have to wait until the next morning to start
trading again. There is no downtime in the forex market. It’s operated
24 hours a day in 3 shifts, 365 days a year. The forex
trading hours in the U.S., Asian and European markets
overlap, so trading at any time of the day or night is seamless.
Fees
Since the forex market isn’t
centralized, a trader can buy or sell directly by spot trading. The stock
market always has a middleman, and that means more fees. Every time a stock is
bought or sold, there is a broker or other entity standing between buyer and
seller making money for just being there. Of course, forex
brokers exist, but the spreads are transparent and most
brokers don’t charge a commission or tack on additional transaction fees.
Complexity
Although there is a good deal of formulation and study
to forex market analysis, it really boils down to following just 4 major
currency pairs, compared to trying to follow any number of over 8,000 stocks in
the stock market. Traders also make use of forex systems to help determine the
best time to buy or sell a given currency, simplifying the trading process.
Speed
Under normal market conditions, forex trades are
instantaneous, thanks to programs that automatically execute on a forex trading signal. There is little
chance of missing a trade because of execution time. In the stock market, your
order is passed to the trading floor, where it can take several minutes to make
the trade.
Forextips.com is committed to educating the forex
trader in all aspects of foreign currency trading. Click hereto get information on a free forex webinar to help
you maximize your success in the forex market.
Pasted
from <http://www.forextips.com/forex-education/stocks-vs-forex/>
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