If you’re new to foreign exchange, or forex, as it is commonly known, you’re probably wondering what makes it different from stock exchanges. Forex is both similar and different to stock exchanges. Here are some of the main differences.
Unlike the stock market, where money is traded for shares in a company’s stock, Forex is all about trading one type of currency for another. In both markets, you make money by following the same principle: buying low and selling high. However, the forex market differs from the stock market in that going long (betting on a rising price) or short (betting on a falling price) is equally easy.
You may have experience as a forex trader and not even know it: anyone who has traveled to another country and exchanged their home currency for the local currency has traded forex! Of course, the global forex market operates on a much larger scale, involving importers and exporters, multinational corporations, portfolio managers, hedge funds, and speculators. Some of these players are doing business in other countries, some are hedging one currency against another in order to prevent losses, and some are engaged in currency speculation – trying to predict and profit from favorable currency movements.
The forex market is one of the most exciting and trader-friendly markets in the world. Here are some other useful facts to know if you’d like to become a forex trader.