The (Foreign Exchange) Forex Trading Market Explained.
 

 

FOREX versus Stocks

Stock exchanes are long term investments and forex is a short term market

Stocks have been a popular investment for hundreds of years.  Companies issue stocks to raise capital for expansion and new projects, and each share of the stock represents a partial ownership in the company.

When the company does well and makes a profit, the value of the stocks rise.  Stock owners can sell their shares for a profit or hold on to the stock for even more gain in the future.  Sometimes companies will issue dividends – part of the profits that are distributed to share holders.

Stock Exchanges

Stocks are traded on stock exchanges.  Most stocks are bought and sold through brokers who charge a commission or fee for this service.  American stock exchanges include the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation System (NASDAQ).  Most stocks are only listed on one exchange, although large companies may have listings on several exchanges.

Stocks were traditionally seen as long term investments.  So called 'blue chip' stocks - those having proven value over many years - may form the backbone of an investment portfolio.  Short term trading is a relatively new phenomenon made possible with the advent of Internet trading.  Day traders attempt to take advantage of large daily fluctuations in the market by buying and selling many times in one trading period.  It is relatively risky and any profits realized are reduced by broker commissions charged on each transaction.

Stocks may sometimes be bought on margin, meaning that the investor borrows money to buy the stocks.  Margin rates are usually around 50% - the investor can borrow as much as half the value of the stock.   

FOREX

The Foreign Exchange Market (FOREX) is quite different from the stock exchange.  In contrast to the stock exchange, the FOREX is primarily a short term market.  Most traders enter and exit deals within a 24 hour period – sometimes within a few minutes.  Many FOREX trades can be made in one day without building up a large brokerage fee because FOREX trades are commission free.  Brokers earn money by setting a spread – the difference between asking and selling prices.

The FOREX is the largest financial market in the world.  It is handles transactions worth $1.5 trillion every day.  By comparison, all the American stock exchanges combined handle daily transactions worth about $100 billion.  The huge volume of FOREX means that it is one of the most liquid markets in the world.  There is always a buyer and seller for any type of currency because the world economy relies on the movement of goods from country to country.  The stock market is less liquid because participants may choose to hold their investments or move on to other markets.

The FOREX is not located in any one location.  Trading markets are located world-wide and because of difference in time-zones trades can be made 24 hours a day, 5 days a week.  Trading begins in Sydney, Australia on Monday morning (Sunday afternoon New York time) and continues non-stop until Friday afternoon New York time. 

Stock exchanges have more limited trading hours.  While it is possible to trade on exchanges world-wide, each exchange is independent and operates for just 7 hours a day.  There is no way to buy or sell a certain stock that is only traded on one stock exchange when that exchange is closed.

Other advantages of FOREX?  It is more predictable than stocks.  It follows well established trends; it allows high leverage – typically 100:1 instead of 2:1 on the stock market; and it doesn't require a large investment – mini accounts as small as $250 can get you started in FOREX.

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Introduction to Online Forex Trading
Current Forex Currency Rates
Forex Trading
How to Get Started In FOREX Trading
FOREX versus Futures Market
FOREX versus Stocks
FOREX Trading Philosophy
FOREX Tools
Fundamental Analysis In Forex Trading
Forex Technical Analysis - Part 1
Forex Technical Analysis - Part 2
FOREX Trading Strategies
Trading Currencies on Margin
Currency Option Marketplace
FOREX Signals
How to Read FOREX Quotes
Calculating FOREX Profits and Losses
Risks of FOREX Trading
FOREX Training
FOREX Trading Software
FOREX Brokers
FOREX Glossary
Forex Updates and Training
Crash Course in Forex Education
How to Recognize Patterns in Forex Trading Markets
Defining Exotic Currencies and Their Impact on Forex Markets
Defining Trading Trend and Ranges in Forex Trading
Mind Games – The Psychology of Forex Market Trading
Crossing Currency - What’s This Mean to Forex Traders
Money Management Basics for Forex Traders
Choosing Your Forex Broker
Expensive Beginner Forex Trader Mistakes
The Elliott Wave Theory for Forex Markets
Failsafe Facts to Guarantee Failure in Forex Trading
Five No Nonsense Strategies in Forex Trading
Global Expansion and It’s Reaches within the Forex Market
Hedging in the Forex Market
The Important Ways to Keep From Losing in the Forex Markets
An Overview of the Euro’s Performance in the Forex Markets
Six Trading Tips for the Forex Newbie
The Lowdown on Day Trading
Interpreting How Interest Rates Drive the Foreign Exchange Markets
The Basics of the Bollinger Band Technical Indicator in Forex Markets
Relative Strength Analysis in Forex Trading
The Basics on Understanding Forex Options
Forex Charts – What Are They and How Do You Read Them
Interpreting the Future of the Oil Marketplace and How It Affects Forex Trading
Top Five Economic Indicators that Drive Forex Trading
Rules for Trading in Forex Markets
How Does the Japanese Yen Stack Up Against the US Dollar in Forex Markets
Pivot Points in Forex
The Ins and Outs of Trying Out a Forex Demo Account
The Top Currencies to Watch in the Forex Trading Game
Defining Moments Regarding Trading Trends and Ranges with Forex
Top Ten Basic Terms in Forex Trading and Their Definitions
Forex Folklore Investment Myths in the Market
Five Economic Driving Forces that Influence Forex Trading
Day Trading All You Wish You Did Not Have to Know
Time line for Daily Forex Trading When are the Optimum Moments
Forex Relative Strength Analysis
How Forex Quotes Can Influence your Trading Tactics
Forex Market RSS Feed
FOREX Links
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