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Monday, December 20, 2010

Basic Of Forex : 2


We continue on the subject of The Differences Between Stock and Forex.

What I'm going to tell you is the breakdown from the points that I mentioned to you from the last post (Basic Of Forex).




 

VS










   Stock    : Traders buy and sell stock

   Forex    :Traders buy and sell currencies



  • People are always confused for these two types of markets. What can I tell you here is, the stock market is about ‘you’ buying a stock of a company. It means that, you are a shareholder for the company even just for 0.01%. For the forex market, you are buying or selling the value between two types of currencies.

 


 


 


 

               Stock    : There are thousands type of stock


               Forex    : There are 6 major world currencies




  • If you want to buy a stock, you will find many types of stocks from different companies which require you to evaluate at the first place. This means that you need to understand and know all the situations that happen in the company that you want to buy the stock. It is simply because every rising or falling price of the stock depends on the efficiency of the company. For instance, in the forex market, you are exposed with well known currencies that you basically know like US Dollar (USD), Pound Sterling (GBP), Euro (EUR), Japanese Yen (YEN), Australian Dollar (AUD), and Canadian Dollar (CAD). With this small amount of selections, you’ll be able to focus on the currencies pair. 

 


 


 


               Stock    : Buying stock is easy, to sell is hard



               Forex    : You sell or buy any time you want




  • If you want to buy the stock in the stock market, you'll need to wait and find people who want to sell. If you are lucky enough, you might be able to buy from the new company stock that just has been listed in the market. How about to sell it? To sell your stock, you must find buyers that want to buy the value of your stock at that point of time. However, when the market is crumbling it’s hard to find the buyers because people don't buy the stock during that time. So you'll stuck with it. In the forex market, if you want to buy or to sell your trade, you don’t need to find the buyers because all of your transaction is between your broker and it is directly channelled to the bank. Even when the market is going down, you still have an option to sell your trade to make profit. You can get in and out from the trade in the forex market at anytime you want without looking for people to buy your position. Lovely, no one loses in the process.

 


 


 


 


               Stock : Limited buyers and sellers



               Forex : Unlimited buyers and sellers





  • In the stock market, there are limited buyers and sellers because every stock companies have their own certain amount of limit. This causes people confuse to get what are the types of stocks that they want. However, in the forex market people can buy or sell at anytime they want. The best of all, everyone can buy or sell in the forex market without being worried the limit for each currency pair. There are no limits between currencies pair.

 


 


 


 


               Stock : Traders can only trade when the market is open



                Forex : Traders can trade 24hours a day





  • What do you need to remember when you are buying the stock is to know under which market that you have bought your position. As for example, you buy a stock from Wall Street Market in US. What will happen every time you want to buy or sell your stock is to make sure the transaction is happening between 9.30 am-4.30pm (US Time Zone). If you miss, you need to wait for the market to open the next day. Unlikely in the forex market, you have 24hours to do your trading. It is simply because forex market does not have a base market like the stock market. It continues by different markets that open at different time. For example, we have the Japanese market which is surely open in the different time from the Wall Street market. What is happening here is an automatic open market in the world of forex. The advantage here is people can trade forex at anytime that they want. As a word from my sifu, "Don't do something that sell your time, do something that buy your time" .

 


 


 


               Stock : One way maket



               Forex : Two way market





  • Like my point before, a stock market is depending at the place you buy the stock. You are bounded to that specific market timeline in doing your trade. As for the forex market, the time is yours because you have 24hours open market.

 


 


 


 


               Stock : Effected when economy crisis happens



               Forex : Doesn't have effect with the economy (Recession Proof)





  • Looking back what had happened in 2008-2009, the economy crisis happened and the entire world were affected by the crisis. Even the strong economy country like USA took a big punch and now tries to get recovery. For certain countries in Europe like Greece, it also got hit as it was being declared as bankruptcy in accordance to its economical status. When economy goes down, it takes the stocks, properties, and everything down with it. Everyone wants to sell their stocks at the time but nobody wants to buy. Even the public listed company like Lehman Brothers goes down with the economy. However, in the forex market many traders get their highest profits when the economy crisis happens. Like I mentioned to you earlier, it will never affect forex market because we follow the trend wherever direction it goes. Even the stupid trader will make profit at this time.

 


 

I hope my explanation in this topic can be understood by everyone who seeks for the knowledge. If you have any questions or even wants to correct my post, do comment and email me at forex.qna@gmail.com. Thank you.


Note : Although in this post I give detail about the differences between stock and forex market, it doesn't mean that the stock market is not good to trade. This is just my point of views about the market as a forex trader.

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