Forex Invest for Success

Forex Market versus Stock Market

Forex is a shortened version of the word Forex Exchange. This refers to the commercial transaction involving foreign currencies where a trader purchases a currency and then sells the same currency to another trader. This is different from stock trading where traders purchases and sells companies' stocks.

Foreign exchange trading has always been around. In fact, this market was established in the early 1970s. It became immensely popular when the Internet finally made it possible for people to trade online and to keep themselves updated with the changes in the market via the Internet. Nowadays, forex traders can easily get real time information of rates and other vital trade information online.

While both the stock market and the currency trading market deal with money, there are still differences between the two - besides the obvious. Of course, the items being purchased and sold are not the same. Aside from this, however, another difference lies on the volume of money that is exchanged on a daily basis. The stock market is an established centralized trading market, but it cannot boast of the same huge trading volume. Trillions of dollars are exchanged in the forex market on a daily basis. This is considerably larger than the volume of money exchanged by people trading stocks.

Aside from the trading volume, another difference lies on the kind of traders or players involved. In stock trading, the players are usually private traders and multinational companies. In foreign currency trading, you will find governments, multinational companies or institutions, international banks and private traders transacting business.

The good thing about trading foreign currencies is that you would enjoy the market's liquidity. Currencies can be quickly converted into cash. This is not something you can say about stocks. It would take you a while before you can even convert the stocks into cash. It is this liquidity of the forex market that facilitates fast transactions. This is why you need to think fast when you are dealing with currencies.

The other difference between trading stock and trading foreign currencies is that the market for the former is centralized while the latter is decentralized. In fact, they are so decentralized that they operate globally. In order to transact, buy and sell currencies, you would have to go online, get the figures and make the deal. There are forex markets all over the world. You will find one in Tokyo, another in London and the rest in some of the world's largest cities.

There are still other differences between the stock market and the forex market. However, you can never really say that trading currencies is better than trading stocks. You may fare well when trading stocks but you may perform badly when trading currencies. It depends on your skills. The bottomline then is that what determines your success is your skill, so if you want to venture into currency trading instead of stock trading, you should devote time and effort to learn the ins and outs of foreign exchange market trading.