Forex vs stock exchange – basic differences
The stock market operates in strictly defined hours, time zones – forex operates 24 hours a day.
After the stock market session there is a marasmus, liquidity is zero. Forex provides liquidity all the time because of the much higher trading value. The average value of this turnover is nearly USD 2 trillion per day. A 24-hour cycle leads to transactions taking place almost at any point in the world.
Although the forex market is called an unregulated market, this does not mean that it is not subject to any regulation. The lack of regulation in this aspect means rather that there are no restrictions on the operation of the market.
The regulations for the stock market are strictly defined, in contrast to the forex market.
What can you invest in?
Approx. 60% of transactions on the forex market are FX-related and consist in earning money on differences in exchange rates of currency pairs. The main pairs are:
If e. g. The dollar gains against the euro as a result of interest rate increases or good macroeconomic data (inflation, low unemployment, high GDP growth), and investors with a position in US dollars will earn profits. Conversely, holders of positions in the euro that are expected to grow in European currency will suffer losses.
The remaining 40% are contracts for the value of stock market indices and prices of raw materials (oil, gold, silver).
Success in the forex market depends to a large extent on the ability to predict the situation in the future.
How will market data affect exchange rates, raw material prices, etc.? These are the key questions for every investor.