By: Saeed Yasir

Category: Forex Basics

Submitted On: 2012-08-30

To a number of people, the Forex market is akin to several financial markets. At first glance, you may think that the foreign exchange market is more or less the same as stock exchange and commodity trading. Nonetheless, there are a few differences. Listed herein, are some of the key differences between the Forex market and stock and commodity trading:

#1: Trading Hours

The stock and commodities market have strict operating schedule. Whereas the commodities market operational hours may differ from one place to another, the stock exchange is open for business 8 hours a day (i.e. Between 8am and 5pm). In addition, the stock exchange market is open for business 5 days in a week (i.e. Monday to Friday). This is a huge contrast to the Forex market that is open for business 24 hours a day which consists of three shifts. When trading in the foreign currency market, you can choose to utilize US, European or Asian Forex trading hours. Then again, the trading hours tend to overlap thereby allowing you to trade in currency at any given time of the day or night.

Whereas leverage is used in all the markets, the foreign currency market provides the trader a considerable amount of leverage. Whats more is that you do not have to endure the hassle and bustles of getting leverage in the Forex market as is the case with commodity and stock exchange market. All you have to do is load your trading account with at least $500 and youll start trading foreing exchange.

#3: Trading Markets

The Forex market is not limited to a geographical region. However, this is not the case with stock exchange or commodity trade. Because of the convenience and flexibility that Forex market offers traders, they are commonly referred to as OTC Over-the-Counter Exchange. Thanks to improved technology, there are platforms that allow the trader to conduct trade while on the move. These types of Forex markets are referred to as mobile trading. Stock and commodity marketplaces are centralized. If you want to buy and sell stock, you need to be in a central place where all transactions are carried out. It is for this reason that there different types of stock markets such as NYSE and NASDAQ.

#4: Dissimilarities in Regulation

Commodities and stock exchange markets are highly regulated. This is a huge contrast to the foreign currency exchange market which is considered by many as the Wild West. Whereas the relevant bodies have tried to bring some sanity into the Forex market, majorities of the players do not abide by the rules. Most brokers and traders constantly circumvent the rules so as to increase their profits. Perhaps this is why most investors are not keen to invest in the Forex market.

#5: Trading Speed

Availability of applications that allow traders to automatically execute trades based on trading signals ensures that you do not miss out on a trade. But in the commodity and stock markets, you have to wait for an order before executing any trading session. The trading speed is high as compared to the stock trading.