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Online Trading Tips

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by Jay Visaya

The stock market can definitely be a great way to increase your assets in a short period of time with little effort. However, stock market trading can be slightly overwhelming for those with no experience in this area. One area that traders are particularly interested in lately is the foreign exchange market, or forex. How does forex trading compare to futures/stock/options trading?

First let’s look at the regular stock market. Stocks are represent shares, or investments in a company. When you purchase a company’s stock, you are essentially purchasing a part of the company and become part owner. If the business makes a profit, the value of your stock will increase. Consequently, if the company loses money, the value of the stock falls. When you buy or sell a stock, you trade it.

The foreign exchange market is similar to futures, stock and options trading, with two major differences: First, the forex market is worldwide, with financial centers located around the globe. And instead of a company’s stock being traded, currencies are traded.

The forex market has many advantages that make it preferable to many investors. The forex market is typically very liquid because buyers and sellers are easily found. Also, there are no commissions that must be paid as is the case with the stock market.

The main advantage to the forex market, though, is that being a worldwide market, it’s always open. Major financial centers are located around the globe, so you can quickly react to news at any time, 24 hours a day. This helps you take advantage of good news while minimizing losses.

The spot market is one of the most important parts of the forex market. It has an extremely large volume of trades that can usually be settled immediately. At most transactions are completed in as little as two business days.

Another important aspect of the foreign exchange market is forex hedge trading which is also known as hedging. This is conducted in a similar manner as the stock market. Investors hedge in order to protect their investment as much as possible.

There are a lot of similarities between the foreign exchange market and futures/stocks/options trading. The main difference is in what is traded (currency vs. stocks). But the forex market has many advantages, including its liquidity and worldwide availability. For those looking to increase profits, forex is a great option.

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