The foreign exchange market might seem to some people very similar to other financial markets. On the surface, the forex exchange has many similarities to the stock exchange. However, there are a number of differences. Below is a breakdown of some of the major differences that might not be obvious to everyone. Some sees foreign exchange forex market a very similar to other financial markets. It is true that forex trading shares many characteristics with the stock exchange, but upon examination, you will learn that they also have a number of differences that distinguish forex and the stock markets from each other.

We listed a few of these differences according to 1 trading hours, 2 trading market, 3 financial friction, 4 speed and 5 complexity. Both the stock market and the forex market operates in a strict schedule. Most stock market operates for 8 hours, and then closes until the next morning when it open for trading again.

For example, the Australian Securities Exchange ASX trading hours is between 10 am until 9: You can check a more elaborated schedule in the ASX web site here. In contrast, there is no downtime in forex trading.

The forex market operates 24hours a day in 3 shifts, throughout the entire year. You can choose between the US, Asian or Europeans forex trading hours, although they do overlap and thus, allows for currency trading day or night. Forex, unlike the stock markets, are not geographically tied down. It is in fact considered an over-the-counter OTC exchange. It can be conducted on a location best suited to the demand and convenience of the trader. On the other hand, stock markets are centralized. This means that it is located mainly in one place like New York Stock Exchange NYSEin where all trades are entered or exited.

The stock market always require a middleman, which thus results to more financial friction, or simply put: Everytime a stock is sold, a middleman, may it be a broker or some other entity, is always standing between buyer and seller. They make money just to facilitate the trade. The same is the case every time a stock is bought. You have to go through a middleman.

That is not the case with forex trading. In forex market, a trader can buy or sell directly by spot trading because the forex market is not centralized. But there are of course, forex brokers. But the edge is, in forex market, the spread are transparent. Besides, most brokers don't require additional transaction fee or even charge a commission. In forex markets, a binary options scalping strategy can use programs to automatically execute a forex difference between forex and stock trading on a forex trading signal.

This makes forex trading almost instantaneous. A forex trader is more less likely to miss a trade because of the time it takes to execute a single tade.

How Forex and Stock Trading Differ

In stock markets on the other hand, a trader has to get this order to the trading floor, and from there, it could still take several minutes to be executed.

When you think about it, forex trading boils down to tracking just 4 major currency pairs. Of course, one could argue that in forex trading, you got to do a lot of formulation and study for a sound forex market analysis.

On the plus side, many web sites offers forex education resources and forex tips for free. Compare this to keeping tabs on thousands of stocks in the stock market. In forex markets, currency traders has the advantage of using forex systems. These systems help a currency trader in determining the best time to sell, or buy a currency and the best thing that a stock market trader for that is a broker.

Interested in Foreign Exchange? Increase your Forex Education for Free. AU EDITION Thursday, June 22, As of 4: Subscribe AU Edition Australia Edition China Edition India Edition Italy Edition Japan Edition U. FOLLOW Make IBT your homepage. By Lawrence Villamar ibtimesau on April 20 4: Trading Hours Both the stock market and the forex market operates in a strict difference between forex and stock trading.

Trading Marketplace Forex, unlike the stock markets, are not geographically john wanamaker half the money i spend on advertising down.

Financial Friction The stock market always require a middleman, which thus results to more financial friction, or simply put: Trading Speed In forex markets, a trader can use programs to automatically execute a forex trade on a forex trading signal. Complexity When you think about it, forex trading boils down to tracking just 4 major currency pairs. Most Shared Most Read 1.

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