Foreign Exchange Market is Different from the Stock Market

What's the Difference between Foreign Exchange Market and the Stock Market

The buying and selling of currencies is known best all over the world as the Forex market or simply, the FX market. What this market facilitates is the exchange of currencies between to countries; currency trading is what drives the engine of Forex market. It’s been established way back in the 1970’s so that this market exists for more than thirty years now. The Forex market is not tied up on any single business or country, but rather the money making engine of this market lies in the buying and the selling of currencies.

The startling difference between the Forex market and the stock market is the sheer size; Forex market is way bigger than the stock market. In fact, the volume of transaction in Forex for a single day is amounting to two-trillion dollars tops. This amount dwarfs the volume of transaction happening in a day in the stock market of the wealthiest nation in the world. The agencies involved in Forex include governments, banks, financial institutions, and similar institutions from country to country.

The commodity traded in Forex – which is money – is very liquid; easily convertible into cash at any given time, which is the usual thing that’s happening. Investors have easy and quick access to obtain one currency and convert it into another in the Forex market.
Another disparity of Forex and stock markets is the place where trading happens; the Forex’ business arena is the world, not confined to any particular building or slaved of any particular stock market software. Also, the stock market is dependent on the products and services produced in a particular country while Forex includes all currencies in the world.

Given any country, their stock market only opens during working days and it follows a specified trading hour; usually the whole working hours of the day. But its Forex market on the other hand is open 24-hours a day since markets around the world open and close on different time zones. While there is people/institution that’s willing and able to sell you currency, you can trade in Forex. This is the life of Forex market; a 24-hour chance of buying and selling currencies.

Moreover, the stock market for particular country is also dependent on its own currency only; for example, if you want to trade stocks in the US stock market, you can only use US dollar to do so. But if you want to trade currency, the sky is the limit; you have the whole world as your market and thousands of currency as your product. This is perhaps the biggest difference between the Forex and the stock markets.

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