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What accuratetly explains the difference between the stock market and the currency exchange market?
Wiki User
∙ 8y ago
Foreign exchange (forex) market has many characteristics with the Stock Market. But they also have a number of differences that distinguish forex and the stock markets from each other, such as trading hours, trading market, financial friction, speed and complexity. 1. Trading Hours Both the stock market and the forex market operates in a strict schedule. Most stock market operates for 8 hours, and then closes until the next morning when it open for trading again. In contrast, there is no downtime in forex trading. The forex market operates 24 hours a day in 3 shifts, throughout the entire year, with US, Asian and Europeans forex trading hours, allowing for currency trading day or night. 2. Trading Marketplace Forex, unlike the stock markets, are not geographically tied down. It is in fact considered an over-the-counter (OTC) exchange. It can be conducted on a location best suited to the demand and convenience of the trader.On the other hand, stock markets are centralized. This means that it is located mainly in one place like New York Stock Exchange (NYSE), in where all trades are entered or exited. 3. Financial Friction The stock market always require a middleman, which thus results to fees. Everytime a stock is sold or bought, a middleman, may it be a broker or some other entity, is always standing between buyer and seller. That is not the case with forex trading. In forex market, a trader can buy or sell directly by spot trading because the forex market is not centralized. There are forex brokers. But the edge is, in forex market, the spread are transparent. Besides, most brokers don't require additional transaction fee or even charge a commission.
4. Trading Speed
In forex markets, a trader can use programs to automatically execute a forex trade on a forex trading signal. This makes forex trading almost instantaneous. A forex trader is more less likely to miss a trade because of the time it takes to execute a single tade. In stock markets on the other hand, a trader has to get this order to the trading floor, and from there, it could still take several minutes to be executed.
5. Complexity
When you think about it, forex trading boils down to tracking just 4 major currency pairs. Of course, one could argue that in forex trading, you got to do a lot of formulation and study for a sound forex market analysis. On the plus side, many web sites offers forex education resources and forex tips for free. Compare this to keeping tabs on thousands of stocks in the stock market. In forex markets, currency traders has the advantage of using forex systems. These systems help a currency trader in determining the best time to sell, or buy a currency and the best thing that a stock market trader for that is a broker.
Reference: Alpari.com
Another significant element of these markets are worth emphasizing. For the most part trading in the stock markets is for the purpose of making investments in publicly owned corporations, either buying or selling these stocks or also referred to as equities. The main purpose in buying and selling currencies, for the most part is to acquire a certain currency in order to buy products from a company that will accept payments for their products in their home currency.
It should also be noted that in each of these markets, a portion of the buyers and sellers are there for the purpose of speculation.
Wiki User
∙ 8y ago
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What best explains the difference between a fixed currency and a floating currency?
The price of a floating currency is determined by the currency exchange market while the price of a fixed currency is connected to the price of some other commodity.
What best explains what happens to the exchange of a floating currency?
The exchange rate for that currency changes depending on the operations of the free market
What best explains what happens to the exchange rate of a floating currency?
The exchange rate for that currency changes depending on the operations of the free market
What best explains what happens when a currency is pegged to the us dollar?
The value of the pegged currency goes up and down depending on the exchange rate of the U.S. dollar. ALSO Pegging a currency to the U.S. dollar gives that currency the same stability as the U.S. dollar, keeping its exchange rate from fluctuating too wildly.
Which of following best explains what happens in the currency exchange market?
Money is bought and sold using other types of money
Which of the following explains what happens when currency traders buy on?
They borrow money from their broker in order to make a larger currency purchase
Which best explains the dissatisfaction of the merchant class with the Articles of Confederation?
There was no provision for a uniform currency.
Which explains why the Phoenicians developed a currency?
Without a currency, payment is made in goods (including precious metals) and services. A currency can save lugging wagonloads and shiploads of goods around unnecessarily. Trade was a principal activity for the Phoenician cities, so currency served them well.
Which of the following best explains how currency traders can buy large amounts of currency with little money up front?
They buy on margin to provide leverage for a large purchase. They borrow money from their broker in order to make a larger currency purchase.
What explains why Fiat money has no value in itself?
fiat money has only a single use as a medium of exchange
What is the difference between conclusion and evaluation?
A conclusion explains what you found out by your research. An evaluation explains what went well and what could have been improved and how.
What accurately explains why fiat money has no value in itself?
Fiat money has only a single use as a medium of exchange.
