The FX Market Vs. Other Markets

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A market, in general terms, is a place where trades happen. In that sense, the fx market shares this characteristic with other markets in the world, such as the stock market. However, this is where the similarity ends. The truth is that the fx market (as it is often referred to) is a lot different as you will see in this article.

Here are some distinguishing characteristics of the fx market:

1. It only trades currencies. The stock market trades securities and other financial instruments, which include stocks and bonds. The fx market meanwhile only trades currencies, which is mainly focused on the trade of the 'majors': the US dollar (USD), euro (EUR), British pound (GBP), Swiss franc (CHF), Canadian dollar (CAD), Japanese yen (JPY), Australian dollar (AUD), and the New Zealand dollar (NZD).

2. There is no regulated exchange. Compared to the stock market, the fx market has no governing body. Rather, it is self-regulated and is based on credit agreements. Although there is also what is called the National Futures Association (NFA), which is a self-regulatory organisation for the US futures market. So if you are going to trade in the fx market, we recommend that you only do so with a member of the NFA.

3. Works worldwide. The scope of the fx market spans the globe. So whether you are in South Korea or the United States, you can trade currencies. This makes the fx market far more accessible than other types of markets in the world.

4. It operates 24 hours a day. While the stock market operates only several hours a day (only from 9AM-3PM in the case of the Tokyo Stock Exchange, or 9:30AM-4PM for the NYSE), the fx market operates around the clock. Although trades can be influenced by major trading sessions (generally the Asian, European, and North American sessions), you can trade 24 hours a day, from 5PM EST on Sunday (start of the Asian session), to 4PM EST on Friday (end of the North American Session).

There you have it, some of the distinguishing characteristics of the foreign exchange market. So if you are looking to trade in a market that is more accommodating and accessible than other markets in the world, the fx is right for you. For more fx trading tips, check out our fx trading tips section.

By FX Strategy Team, Published on 21st of May 2013
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