The Foreign Exchange Market is Different from the Stock Market
The foreign exchange market is also known as the FX market, and the FOREX market. Trading that takes place between two countries with different currencies is the basis for the FOREX market and the background of the trading in this market. The FOREX market is over thirty years old, established in the early 1970's. The FOREX market is one that is not based on any one business or investing in any one business, but the trading and selling of currencies.
The difference between the stock market and the FOREX market is the vast trading that occurs on the FOREX market. There are millions and millions that are traded daily on the FOREX market, almost two trillion dollars are traded daily. The amount is much higher than the money traded on the daily stock market of any country. The FOREX market is one that involves governments, banks, financial institutions, and those similar types of institutions from other countries.
What is traded, bought, and sold on the FOREX market is something that can easily be liquidated, meaning it can be turned back to cash quickly, or often times it is actually going to be cash. From one currency to another, the availability of cash in the FOREX market is something that can happen fast for any investor from any country.
The difference between the stock market and the FOREX market is that the FOREX market is global, worldwide. The stock market is something that takes place only within a country. The stock market is based on businesses and products that are within a country, and the FOREX market takes that a step further to include any country.
The stock market has set business hours. Generally, this is going to follow the business day, and will be closed on banking holidays and weekends. The FOREX market is one that is open generally twenty four hours a day because the vast number of countries that are involved in FOREX trading, buying and selling are located in so many different times zones. As one market is opening, another countries market is closing. This is the continual method of how the FOREX market trading occurs.
The stock market in any country is going to be based on only that country's currency, say for example the Japanese yen, and the Japanese stock market, or the United States stock market and the dollar. However, in the FOREX market, you are involved with many types of countries, and many currencies. You will find references to a variety of currencies, and this is a big difference between the stock market and the FOREX market.
Every currency that is traded on the FOREX market has a three letter code associated with that currency so there is no misunderstanding about which currency or which country one is investing with at the time. The Euro is the EUR and the US dollar is known as the USD. The British pound is the GBP and the Japanese yen is known as the JPY.
