The Structure of the Forex Market

In order to fully understand the ease with which one can work, trade and otherwise move around within the Forex trading market, you have to look at how other markets are constructed. We are not talking supermarkets where you buy groceries, either. Although you may be able to see the odd similarity with a supermarket and these markets. So, let’s examine the stock market first.

1 – Monopolistic

The stock market is controlled by a single entity. It is a specialist who dictates the prices of all individual stocks in the market. Trades made with those stocks have to go through that specialist. The specialist is obligated to complete the orders of clients. When the number of sellers is greater than the number of buyers there is an extra amount of stocks that cannot be sold off to buyers so the specialist will widen the spread or add to the cost of completing transactions to stop sellers from participating in the market. So, essential the specialist manipulates the market. Forex is not like that.

2 – Too Many Properties

Sure, it’s nice to have choices but with stock markets there are roughly 6,000 different trading identities to bone up on. It would take much more than a super computer to track every single stock and all the intricate details related to prices and whatnot. It’s just too complicated from where we are sitting. We want to make a trade and have it go through as fast as possible because that’s what we want. The stock market doesn’t really do that. However, Forex can.

3 – No Real Competition

With the stock market the price you pay for your transaction includes a commission, possibly a finder’s fee, a non-refundable deposit, a friendship tax, an environmental fee, a sliding scale of extra add-on rates because it’s fun and so on. Okay, it’s not exactly that intense but there are fees with stock market trades that don’t exist in Forex. In fact, Forex is commission-free. Sure, there’s transaction fee but that’s normally recovered in a bid/ask trade and with Forex brokers vying for your business expect to see some sweet deals on those very transaction fees. Sometimes it is a bit like your supermarket where the soup aisle will have six different brands of tomato soup. You shop for the best one at the lowest price. Forex brokers are a lot like those cans of tomato soup.

4 – Not So Easy To Learn

As we’ve pointed out, there are thousands of stocks out there. In currency trading there’s a few dozen currencies and actually four major ones. It’s a lot easier to learn and understand what Forex is all about. Plus, you could easily say the risk factor is far less with Forex (under normal conditions). Add to this the fact that anyone with some basic knowledge can become a good Forex trader. Stock trading is well, harder. Okay, we’ll just go on and say it. Stock trading is a lot harder.

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