Comparing Stock Trading to FOREX Trading
What exactly are stocks? Stocks are bits of ownership of a company. Companies sell out these bits in order to raise money from the market for new expansion plans. How the company does is reflected in what your stock that you own in that company is worth. It is yours to keep or to sell. Over and above this, if the company does well, it will pay you a dividend or profit in proportion to how much you own. Stocks are more than just pieces of paper to keep locked up. They are a vibrant source of money that can be traded, speculated on and used to make more money. There are brokers all over the world who will handle the selling and buying of your stocks for a small commission. This trading is done through what is called a stock exchange. There are many stock exchanges all over the world. In the US, the stock exchanges are the NYSE or the New York Stock Exchange and the NASDAQ or the National Association of Securities Dealers Automated Quotation System. Earlier, people viewed stocks as a kind of lifetime investment like land and it was part of the legacy they left to their heirs. If they had stocks in the large, profitable companies, these were labeled ‘blue-chip’. There’s been a change in attitude lately thanks in no small measure to Internet trading coming into being. Today people are willing to look at stocks as items of trade with which to make money. FOREX or the Foreign Exchange Market is a whole different kettle of fish. It is essentially short-term. It is a minute-by-minute or maybe a 24-hour market. Thanks to FOREX transactions not having any commissions to be paid, many, many trades are sometimes done in a day. Every day, FOREX trades in around $1.5 trillion. That makes it by far the largest market all over the world. Compare this with the stock markets in the US, which, put together usually add up to about $100 million and you’ll see what we are talking about. The FOREX is not just much bigger, it is a much more liquid market. Thanks to being located all over the world, there’s activity every single moment of the working week. You don’t find this in stock exchanges. Normally, seven hours would be the time a stock exchange would be open every working day. Add to that the fact that stocks are usually listed in just one stock exchange and you’ll see the incredible flexibility that FOREX offers you. FOREX also tends to follow a pattern and is not as erratic as stocks can be. Yes, it is definitely more predictable than stocks.
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