Everything You Need To Know About The Foreign Exchange Market
If you’re considering foreign exchange or forex trading then you will probably know it is the largest financial market in the world with a daily turnover that reaches in between three trillion and four trillion US dollars.
You may have previously traded or considered trading in the stock market and may have had some success but when it comes to forex trading there are different factors that you have to take into account in order to be successful.
Stock market trading and forex trading do have their similarities though, the basic concept of buying low and selling high is present in both but foreign exchange trading is generally a quicker process with some trades being completed within 24 hours in comparison to stock market trades that may take several weeks or months to achieve.
As with the stock market, in order to be able to make any transactions you will need a personal broker but you can always use an online broker that provides the software you need to make your own trades under their platform.
The most noticeable difference between stock market trading and foreign exchange trading is the range of choice available when wanting to trade. In the stock market there exist various stock exchanges which within them have a host of different companies to choose from when wanting to invest, with forex trading however you have the choice of trading up to 20 different currencies meaning you have fewer decisions to make when choosing what to invest in.
By having simply 20 currencies traded, the forex market is generally easier to predict than the stock market as there are fewer external factors that may have an effect on the value of currency compared to that of a company floating on the stock exchange.
Forex also requires less capital to trade than stocks do. Generally with stocks you need to pay into the thousands of pounds to be able to purchase a sufficient quantity with which to trade, with the foreign exchange market you can usually start trading with anything above 300 dollars making it more accessible than the stock market.
The last advantage the forex market has over the stock market is its trading hours. The stock market is only open between 9.30am to 4.00pm Monday to Friday compared to the forex market which is open 24 hours during Monday to Friday making it accessible to investors who have full time jobs.
Even though forex trading may seem more lucrative than stock market trading it is not without its share of risks either so if you are considering trading within the foreign exchange market make sure you research each aspect very carefully and for every trade you conduct be sure to have a stop loss order to make sure you minimise your risk as much as possible.
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