The Forex market is a platform to trade international currencies. Financial centers all over the world act like anchors for Forex trading. The main purpose of Forex market is to make sure the smooth functioning of international trade by facilitating currency conversions. In layman’s term Forex trade is when a person buys one currency by paying some quantity of another currency.
Apart from Forex market two other markets which is mostly used by common people are the stock market and the commodity market.
What is stock market?
A stock market is platform where the stocks of publicly listed companies are traded freely. Here the transactions are made though appointed share brokers. The overall value of the world stock market is pegged at $36.6 trillion. When a company is listed in stock market the market value of that particular firm is calculated by the share price of that company.
What is commodity market?
Commodity is market where precious metals like gold, silver and agricultural products like rough rice, Soybeans and wheat are traded. These commodities are bought and sold all over the world on commodity exchanges in standardized contracts.
Difference between the Forex market and stock market
All over the world the stock markets are operated for 8 hours a day and the time of operation varies between each country. But in case of Forex market, it is operated day and night on the basis of three shifts per day. A person who wants to involve in Forex market can make a transaction at anytime of the day or night.
Ease to trade
Stock market is the combination of various stocks from huge number of industries whereas, in Forex market the combination of currencies are extremely low. This helps a trader to trade with confidence and helps him to concentrate on combinations of currencies that will bring him profit.
Another major difference between a Forex market and the stock market is the security you have over your investment. With Forex market the major currencies you will be trading will not fail overnight, whereas with stock market there are chances that some companies can fail without notice.
With Forex market as trader makes all the buying and selling himself and the transaction is made online. But in a stock market a trader needs the help of the stock broker to buy or to sell the stocks.
Difference between Forex market and commodity market
Easy flow of information
The information related to Forex market is easily available online. Moreover, before venturing out into Forex market with your own money you can sign up for practice accounts and practice Forex trading. Once you develop the confidence of making profit you can venture out with your own money. Whereas the information about commodity market is not easily available online. Moreover, to a certain extent the movement in commodity market depends upon nature. When there is a bumper harvest of wheat the price of wheat may go down. So, the commodity trader should try to gather information all over the world on the commodity he plans to invest.
The liquidity in the Forex market is much more than the liquidity that is circulated in commodity market. On any given day the transactions that happens in a Forex market can be pegged to be more than 2 trillion USD whereas, the average daily transactions on commodity market can be calculated at few billion USD.
Hours of operation
As mentioned earlier Forex market is open 24 hours a day for 5 days whereas, the commodity market has restricted time limits on the hours of operation.
The above are the basic difference between the Forex market and other markets. A person who plans into invest in any of these markets should understand these differences and plan things accordingly.
Bio line – Philip is a guest blogger writing informative contents related to Finance and Forex trading. For more information about the basics of Forex trading, especially the beginners please visit http://www.freeforextrading.org/
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