Answer
May 02, 2018 - 02:48 PM
Forex Trading:
Forex trading, also known as foreign exchange, FX or currency trading, is a decentralized global market where all the world's currencies trade.
The forex market is the largest, most liquid market in the world with an average daily trading volume exceeding $5 trillion.
All of the world's combined stock markets don't even come close to this.
Take a closer look at forex trading and you may find some exciting trading opportunities unavailable with other investments.
While the mechanics of trading in the forex market is quite similar to equities in that prices fluctuate based on supply and demand, ever-changing bid and ask prices and the types of orders used by traders are pretty much where the similarities end.
One of the major differences between the forex and equities markets is the number of trading alternatives available.
The forex market has very few compared to the thousands found in the stock market.
The majority of forex traders focus their efforts on seven different currency pairs.
There are four "major" currency pairs, which include EUR/USD, USD/JPY, GBP/USD, USD/CHF, and the three commodity pairs, USD/CAD, AUD/USD, NZD/USD.
Just like stocks, you can trade currency based on what you think its value is or where it's headed.
The big difference with forex is that you can trade up or down just as easily.
If you think a currency will increase in value, you can buy it. If you think it will decrease, you can sell it.
With a market this large, finding a buyer when you're selling and a seller when you're buying is much easier than in in other markets.
Maybe you hear on the news that China is devaluing its currency to draw more foreign business into its country.
If you think that trend will continue, you could make a forex trade by selling the Chinese currency against another currency such as the US dollar.
The more the Chinese currency devalues against the US dollar, the higher your profits.
If the Chinese currency increases in value while you have your sell position open, then your losses increase and you want to get out of the trade.
Stock Trading:
Making a stock trade essentially means that you own a small portion of a large company pie.
Stocks are a type of security that gives the investor a share of ownership in a company.
The number of shares you own in a company, as compared to the total number of outstanding shares for the company represents your claim to the company’s assets and earnings.
When you hold company stock you are just one of many shareholders who have a claim to everything the company owns.
Investors purchase stock for two main reasons:
1. To make money
2. To have influence in the company
The longer you hold a stock, the more potential it has for capital appreciation and a strong return.
But stocks fluctuate in price, and there is no guarantee the company you have invested in will do well over time.
Basic rule of thumb: Know when to hold them. Know when to fold them.
Investors who hold stock in well-performing companies can also make money through dividend payments, which are issued when a company distributes some of its earnings to its stockholders.
The amount you would receive is based on the dividend paid per share multiplied by the number of shares you own.
Forex trading, also known as foreign exchange, FX or currency trading, is a decentralized global market where all the world's currencies trade.
The forex market is the largest, most liquid market in the world with an average daily trading volume exceeding $5 trillion.
All of the world's combined stock markets don't even come close to this.
Take a closer look at forex trading and you may find some exciting trading opportunities unavailable with other investments.
While the mechanics of trading in the forex market is quite similar to equities in that prices fluctuate based on supply and demand, ever-changing bid and ask prices and the types of orders used by traders are pretty much where the similarities end.
One of the major differences between the forex and equities markets is the number of trading alternatives available.
The forex market has very few compared to the thousands found in the stock market.
The majority of forex traders focus their efforts on seven different currency pairs.
There are four "major" currency pairs, which include EUR/USD, USD/JPY, GBP/USD, USD/CHF, and the three commodity pairs, USD/CAD, AUD/USD, NZD/USD.
Just like stocks, you can trade currency based on what you think its value is or where it's headed.
The big difference with forex is that you can trade up or down just as easily.
If you think a currency will increase in value, you can buy it. If you think it will decrease, you can sell it.
With a market this large, finding a buyer when you're selling and a seller when you're buying is much easier than in in other markets.
Maybe you hear on the news that China is devaluing its currency to draw more foreign business into its country.
If you think that trend will continue, you could make a forex trade by selling the Chinese currency against another currency such as the US dollar.
The more the Chinese currency devalues against the US dollar, the higher your profits.
If the Chinese currency increases in value while you have your sell position open, then your losses increase and you want to get out of the trade.
Stock Trading:
Making a stock trade essentially means that you own a small portion of a large company pie.
Stocks are a type of security that gives the investor a share of ownership in a company.
The number of shares you own in a company, as compared to the total number of outstanding shares for the company represents your claim to the company’s assets and earnings.
When you hold company stock you are just one of many shareholders who have a claim to everything the company owns.
Investors purchase stock for two main reasons:
1. To make money
2. To have influence in the company
The longer you hold a stock, the more potential it has for capital appreciation and a strong return.
But stocks fluctuate in price, and there is no guarantee the company you have invested in will do well over time.
Basic rule of thumb: Know when to hold them. Know when to fold them.
Investors who hold stock in well-performing companies can also make money through dividend payments, which are issued when a company distributes some of its earnings to its stockholders.
The amount you would receive is based on the dividend paid per share multiplied by the number of shares you own.
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