subject: Different Characteristics of A Foreign Exchange Market & A Share Market [print this page] Different Characteristics of A Foreign Exchange Market & A Share Market
A foreign exchange market is called forex market and FX market as well. In this market, trading occurs between two nations with different currencies. The FX market that was launched during the early half of 1970s's facilitates smooth occurrence of international transactions. It is one marketplace that does not involve any particular business or making investments in any business. There is only buying and selling of currencies.
Foreign exchange markets are different from share markets on several fronts. The volume of transactions is huge in the former case. Approximately two trillion dollars are traded on the FX market every day. This amount is beyond comparison with the money transacted on the everyday share market of any nation. Various participants in the currency exchange include governments, financial organizations, banks and those identical kinds of authorities and organizations from other nations.
One positive aspect of foreign exchange trading is its easy and fast liquidity. Therefore, whatever you buy and sell in this marketplace can be liquidated (converted into cash) in a hassle-free manner. The exchange of one currency for another can provide investors easy and quick cash in any country. This positive aspect contributes to the huge popularity of forex trading.
Another disparity between the FX and the share market is their respective scope. Foreign exchange markets have a worldwide reach while the stock exchanges are the ones that run their operations within the boundaries of a country. You'll find stock markets principally involving business organizations and products that belong to one country. The FX marketplace is more advancing to bring any nation under its purview.
Various stock exchanges have fixed hours of transaction. Broadly speaking, they abide by the business day principle and will have no trading on weekends and banking holidays. On the other hand, foreign exchange trading usually runs round the clock because of the involvement of mammoth number of nations. There are numerous time zones in which buying and selling activities take place. While one market in a specific country is starting its transactions, a different marketplace in another country is closing down its operations. This is the continuous technique of how the FX trading happens.
Stock exchanges in any nation transact only in their local currency. For instance, the USA exchanges do trading in the dollar and the Japanese exchanges make use of the yen only. Nevertheless, currency exchange involves so many counties and their different currencies. This is a major difference between these two forms of marketplaces.
