The differences between the stock market and the forex market

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Forex Trading
Currency Trading

What is the Stock Market?

The definition of the stock market is simply the business of buying and selling stock for the financial aspect. Stock refers to a supply of money that a company has raised. Investors (or stock holders) give the company this supply of money in order to help that company grow, therefore increasing the value of their stock and in turn making a profit.

The stock market is one of the more traditional ways to create a profit from an investment… even without having much knowledge about it. A person with little or no experience can make a few bucks without much research with traditional investments, such as stocks, bonds and blue chips.

But with thousands of companies to choose from it can be quite overwhelming… and you never know when a company will go bankrupt or fold altogether.

There can be a lot of risk and uncertainty when going after large gains in short amounts of time. It can be difficult to develop a system that can provide a consistent 10 to 15% profit on a yearly basis.

The stock market is country specific, and deals only in business and currencies within that region. There are set business hours that typically follow the more traditional business day, and is closed on Holidays and weekends.

What is the Forex Market?

The forex market, also known as the foreign exchange or the fx market, is the place where currencies are traded. It is the largest, most liquid market in the world with an average traded value of over 4 trillion per day and includes all of the currencies in the world.

Compare that to the $25 billion per day that the New York Stock Exchange trades and you can easily see how enormous the forex market really is. It actually equates to more than 3 times the total amount of stocks and futures markets combined. Forex is awesome!

What exactly is traded on the forex market you ask? The simple answer is money. It is the simultaneous buying of one currency and the selling of another. Currencies are traded through a broker and are always traded in pairs.

EXAMPLE:

The euro and the US dollar ( EUR/USD) -OR- The British Pound and the Japanese Yen (GBP/JPY)

Confused? Think of it as buying a traditional ‘share’ in a particular country. Let’s say you buy British Pound, you are essentially buying a share in the British economy as the price of the GBP is a direct reflection of what the market thinks about not only the current, but future health of the British economy.

Unlike the traditional stock market, the forex market is open 24 hours a day. At any time, somewhere around the world, a financial center is open for business and is exchanging currencies every hour of the day and night.

It follows the sun around the world, so you can trade late at night or early in the morning.

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