We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
GBP/USD
Bullish
USD/JPY
Mixed
Gold
Bullish
Oil - US Crude
Mixed
Bitcoin
Bearish
More View more
Real Time News
  • #Forex Forecast via @DailyFX: US Dollar Technical Outlook on $DXY, $AUDUSD, $USDCAD, $USDJPY & $EURUSD Full Analysis ⬇️ https://www.dailyfx.com/forex/technical/article/fx_technical_weekly/2019/11/17/usd-price-us-dollar-chart-forecast-dxy-audusd-usdcad-usdjpy-eurusd.html
  • Further escalation in Hong Kong will likely bode poorly for risk appetite https://t.co/0NjUd3ahBu
  • How should you trade around event risks and what steps can you take to improve your trading psychology? Find out from @JoelKruger, a trading consultant and mentor. Only on Global Markets Decoded. Missed the episode? Read up here:https://t.co/JWIGJk4vKa https://t.co/WB39x4GP99
  • Poll - Does your personality match your #tradingstyle? Vote and find out from @WVenketas here: https://t.co/vREsUIWSJd https://t.co/Ft0ExAmMpq
  • #Dow Jones hits record high, however, central bank liquidity prompts volatility implosion. #FTSE 100 among underperformers with focus remaining on politics. Get your #equities market update from @JMcQueenFX here: https://t.co/EOFleGSeBp https://t.co/ecAyfSUeAM
  • RT @C_Barraud: 🇪🇺 #ECB’s Muller Says More Assets Could Join Stimulus List in Slump - Bloomberg https://t.co/roGEgu0VTQ
  • With increasing volatility in weather patterns, how might storms, hurricanes and floods rattle the supply chain for petroleum-based products and impact crude oil prices? Find out from @JStanleyFX here:https://t.co/O4dgBl47fq https://t.co/OQYqZAYt9S
  • Currency Strategist,@PaulRobinsonFX is a Swing trader. What is your #tradingstyle? Take the quiz and let us know: https://t.co/LPBOcS0Vtd https://t.co/WzRYeqRhUL
  • Despite what your #tradingstyle is, you should be keeping a trading journal. How can you start keeping a trading journal? Find out: https://t.co/0akgWbyJEw https://t.co/4ehMlN4zv1
  • The Euro’s struggle to move higher against a range of currencies continues and without further support this is likely to continue into the year-end. Get your $EURUSD market update from @nickcawley1 here: https://t.co/myZ7R0eGUb https://t.co/12WJd53Cx4
Forex Compared to Other Markets

Forex Compared to Other Markets

2014-02-16 21:55:00
Rob Pasche, Forex Trading Instructor
Share:

Most Forex traders come from some other trading background before they turn to trading currencies. Having a background in other markets can jump start your FX trading career but it is important to understand the differences between the Forex market, the stock market, and the futures market.

Forex Market (Spot Forex)

The Forex market, sometimes referred to as spot Forex, is the largest market in the world with over $5 trillion in volume each day. Participants buy and sell currencies "Over-the-counter" 24 hours a day, 5 days a week. Some of the more popular benefits to Forex trading are:

  • Low cost of trading (spread only)
  • Flexible trade sizes in 10,000 unit increments
  • No contract expiration dates

Currency Futures Market

The currency futures market is available through the Chicago Mercantile Exchange (CME) in the United States. While the currencies involved are the same as the spot market, the futures market is noticeably smaller, with around $100 billion in daily trading volume. Currency futures are traded 23 hours a day, 5 days a week and offer similar leverage to what can be found in spot FX trading. But there are a few drawbacks to trading currency futures:Moderate barrier to entry (around $5,000 account minimum)

  • Moderate cost of trading (spread + broker commissions + data fees)
  • Contract expiration every 3 months
  • Larger minimum trade size (10,000 units and up)

Stock Market

The stock market allows participants to buy and sell ownership in companies that they believe will grow in value over time. Over half of United States' households own stock in some form or another with around $300 billion worth changing hands each day on US exchanges. Most stock exchanges are open only a few hours a day and require a higher margin requirement than the Forex market and currency futures market. A few other differences between trading stocks and spot FX:

  • Low barrier to entry (around $1,000 minimum)
  • Moderate cost of trading (spread + commissions + data fees)
  • Flexible trade sizes (but fixed commission making smaller trades more expensive)
  • Day trading rule - $25,000 minimum account required if 4 day trades are closed across a 5 day span or trading account is frozen for 90 days

When compared apples to apples, the spot Forex market allows traders more flexibility to trade how they want, when they want and at a lower cost. Are you ready to take your stock or futures trading skills and try them out in the Forex market? Open up a FREE Trading Demo account today.

Good trading!

---Written by Rob Pasche

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.