Forex Trading Vs The Stock Market Trading

Forex trading is trading in the forex market and basically involves trading in currencies while the stock market trading is the trading of stock in a stock exchange market. The two types of trading are similar to some extent, but the differences are numerous as well. Differences range from the risks involved, the parties involved in a transaction, the regulations in the markets, to name just but a few. The stock market is controlled by a central body, the stock exchange market, which typically constitutes a number of brokerage firms that regulate the trading activities and monitor the activities as well. When they sense any unscrupulous activities they are in charge of laying sanctions for the participants in the market. This is not the case with the forex trading market, the market is self regulated and this fact makes the market such a reliable market as the self regulation is very effective. Manipulation in the market is rare as the market is very liquid and the rates there are determined purely by forces of demand and supply.

Commissions and lack of commissions forms the other significant difference between the two markets. The stock market involves the services of brokers and they play a major role in the trading, they actually trade in the market on behalf of their clients and in return they are paid a commission for their services. The forex trading market exhibits a different scenario. There are no brokers in the market. The trading involves only two parties and they are both dealers and they both bear the market risk in the transaction. There are no commissions paid in the market and this means the dealers get to reap the full benefits of the transactions and bag all the profit that accrue from the trading.

The lack of brokers in the forex trading market has its disadvantages as well. The most obvious one being the lack or deficiency of know how with the traders. The brokers are professionals who have dealt in the business for long and typically constitute a team of professionals who are most likely to trade better than an individual doing it alone. They have better analytical skills which they have acquired in their daily trading and are more likely to make more sound decisions.

However even with the pros and cons discussed, the forex trading market forms the largest financial market and has a daily turnover that goes into billions of dollars which cannot be compared with any stock market figures. The risks are higher in the forex trading market, but the profits are higher too.

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