Based on the value of foreign currency traded, Forex trading is one of the largest…
The Forex market is run differently than other markets such as the stock market. Just because you are a trader or investor this does not mean that you will automatically find all markets are to your liking. Trading in the Forex market involves taking a different approach. Here we look at some of the ways that the Forex Exchange is unlike other markets.
The Forex is a 24 hour market, whereas stock trading and equities are limited to primary day trading hours. The hours for stock trading have been expanding in the past few years. However, they are still less than the hours for trading in the Forex. Trading activity in the Forex takes place in all time zones throughout the workweek, and it can sometimes be done on weekends, whereas the same cannot be said for stock trading. This makes the Forex much more convenient than other types of markets.
One of the biggest differences between Forex trading and stock trading is that there are no exchanges allowed. There is exchange-based Forex trading for futures. However, the primary trading that takes place is done over-the-counter in the spot market. Where the Forex is concerned there is no NYSE.
When you look at transactions in the Forex on a large scale you will see that it is an inter-bank market. What this means is that banks trade with one another for their customers. Larger speculators can also become involved with the inter-bank market and can easily negotiate deals that are in the multi-millions. Those who chose to trade on their own and in smaller quantities most often go through dealers or brokers to do so.
These are all things that may take the stock trader some time to get used to when he moves into the Forex market. Spot Forex trading does not report volume as a figure as is done in the stock market. The volume information cannot be easily accessed, which can be of concern to some traders. As well, there is no central location to view price data.
Transaction processing is not done the same in Forex trading as it is done in the stock market. When a person trades in the stock market an order is put through to a broker who then makes a trade with another broker or dealer (this is known as over-the-counter) or else the deal is facilitated through the exchange. On the other hand, when it comes to spot Forex trading, trading is often done by individuals who work directly with a broker or a dealer. The broker in this case then deals with the other side of making sure a trade goes through. This is the most common way that a trade takes place in the Forex although it is not the only approach that is used.
If you have always been a trader in the stock market but have decided to give the Forex a try you may find the transition is one that has a few bumps. The two markets are different and require a period of adjustment. However, being able to trade in either of the markets opens up more opportunities for you where your money is concerned.