What is The Forex Market? |
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The Forex or 'Foreign Exchange' market is a market in which currencies can be bought, sold and exchanged. Participants in this market range from banks, individual retail traders, and even travelers needing local currency.
The price at which market participants buy or sell a currency is determined by its exchange rate, which is the value of one currency in terms of another currency - the amount it costs you to buy one unit of another currency. A unit of currency is required to be purchased. How much money is required?
For example, the euro is worth 1.21 US dollars, meaning it costs 1.21 dollars to buy one euro.
On a daily basis, millions are traded by many different individuals and corporations - on average, the Forex market trades upwards of US$5 trillion per day!
However, this 'price' is not fixed and is always changing.This is because exchange rates are driven by supply and demand - the higher the demand, the higher the price, and vice versa.
Exchange rates can change depending on things like world events, news and other (sometimes unknown) factors, although on a day-to-day basis the changes are usually very small.
What is The Stock Market? |
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What's a stock?'If you buy a stock or 'share' of a company, you are essentially buying a piece of it.
The more shares you buy in a company, the higher the percentage of ownership you have. Most companies also pay dividends to stockholders on an annual or quarterly basis.
Profit is money the more you have, the more money you get. Stock market traders usually hold their positions for days and months.
A stock market is a collection of exchanges that trade different stocks in different companies. Shares can be bought and sold (just like currencies can be bought and sold) through this network of exchanges.
Unlike the foreign exchange market, which operates 24 hours a day, the stock market is open for 7 hours from 10:30 am to 5 pm. Eastern Time (on weekdays).
The daily trading volume is $200 billion, which is significantly less than the $5 trillion traded in the forex market. If you want to trade billions (and trillions) of dollars daily, you can learn to trade stocks or forex.
Forex vs Stocks |
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The main reason one is interested in the stock or forex market is to make money, or to hedge trades. But how does money trade in one of the above markets? Will it help determine which market is better?
How Can We Make Money From Forex Trading? |
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They answer to this question is very simple for both stock with forex trading buy low, sell high. However, the harder and more complicated part is actually finding the 'high' and 'low'.
(1) There is no clear answer as to which theory is better, and thus the debate between technical and fundamental analysis depends on the individual and their personality.
(2) Both technical and fundamental analysis aim to predict future price movements based on the principles of supply and demand.
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