Most investors starting out for the first time probably won’t understand the difference between trading FX (foreign exchange) and trading and the stock market. The FX market has both similarities and anomalies with the stock market. The main differences are as follows:
Whereas the trading on the stock market involves acquiring shares in a company in exchange for money, trading FX involves exchanging the currency of one country for another.
The same principals can be applied in either market when it comes to earning profits. That is to buy low and sell high.
However, with FX, the investor has the option to both buy (go long) with the aim to sell at a higher price or sell (go short) where he/she can profit by buying back at a lower price. The ability to either buy or sell from the outset differs from the stock market.
Almost all customers have some experience trading foreign exchange. The only difference is they do not realize it. Anybody who has travelled to a foreign country will have experienced changing their home currency for the local currency of their destination. This is one form of foreign exchange trading.
Of course, the global FX market operates on a much larger scale with import/export companies, multi-nationals, portfolio managers, hedge funds as well as other investors participating. Amongst these players, there are people with international business interests, those looking to hedge risk by swapping the currency they hold for another and currency speculators looking to make profit from an underlying trend in a particular currency. The list goes on.
Foreign exchange or, FX as it is commonly called, is one of the most exciting markets for investors to get involved in as well as being one of the easiest and most investor-friendly markets to engage in. If you are looking to start trading FX, there are several things you should know.
Due to the enormous size of the FX market with individual and institutional investors and even governments taking part, it is almost impossible to manipulate prices for any length of time. For this reason, price manipulators, with the occasional exception of governments implementing monetary policy, are almost unheard of.
The market operates almost non-stop from 20:15GMT Sunday evening, closing at 22:00GMT Friday.
With its massive scale and 24/5 accessibility, forex is exceptionally liquid, making entering and exiting even very large positions comparatively simple. With massive corporations and central banks trading forex, there’s plenty of room for you, too!
The FX market decentralized and is not regulated centrally.Banks, brokers and other traders around the world can participate with ease over the internet via their computer. Banks and securities houses each manage their trading operations themselves. The market is generally free from an all-encompassing central framework with few restrictions if local domestic regulations are abided to.
The high leverage offered in the FX market it is possible for investors to make large profits exceeding their investment. Certainly, the risk of loosing money also increases when higher leverage is used.At Sigma FX, we can offer leverage for trading up to 500:1 according to the investor’s requirements. Of course, lower leverage settings can be applied to reduce risk in line with an investor’s risk appetite.
In past times, the FX market was the domain of large institutional investors and wealthy individuals. However, that has all changed with the spread of the internet. At Sigma FX, you can get started with as little as $500.