How is the forex market different from other markets?

1. Fewer Rules: Unlike the trading of stocks, futures or options, currency trading does not take place on an exchange. As a result, investors are not held to the same type of rules and regulations. It is not controlled by any central governing body, and there are no clearing houses to make sure the party you are buying the currency from actually pays up. In some countries, there are regulatory bodies that grant licenses to compliant organizations to function as brokers or set levels of acceptable margin.

2. Low Commissions: Since currencies do not trade on a traditional exchange, fees and commissions differ widely from the commission structures found in other markets. Instead, many forex brokers make money on the difference between price you pay to buy, and the amount you receive when you sell, known as the spread. Since the dealer is receiving payment through the spread between buying and selling, it can appear as though there are no fees for entering a trade. It is wise to not assume that there is no cost to you when a dealer offers “commission-free” trades. In many cases, the dealer may build in a relatively wide bid-ask spread and it is often impossible to determine how much of the spread is going to the broker. Regardless, given factors such as liquidity, deregulation and electronic delivery, cost-savings are passed along to investors via low commissions or fees.

3. Trade Whenever You Want: Forex markets are open 24 hours a day, so if you are a night owl or early riser you can set your own trading schedule.

4. Easy to Get In and Out: You can buy and sell currencies with the click of a button, instantaneously. The market is so liquid that you will never be stuck holding onto a position that you want to get out. On the other hand, you will never be limited by supply and can essentially buy as much of a currency as you can afford.

Making And Losing Money

Related Articles
  1. Trading

    How Forex Brokers Make Money

    Forex brokers set their prices based on commission, spread, or a combination of both. Traders have to be cautious in the thinly regulated forex market.
  2. Trading

    How To Pay Your Forex Broker

    Three types of commissions are used in this market. Learn how to get the best deal.
  3. Trading

    Getting Started In Forex

    Before entering this market, you should define what you need from your broker and from your strategy.
  4. Trading

    Forex Trading: A Beginner's Guide

    Learn about the forex market and some trading strategies to get started.
  5. Investing

    The Foreign Exchange Interbank Market

    Can your forex broker offer you the most competitive pricing? Learn how the market's biggest players affect you.
  6. Trading

    Top 5 Forex Risks Traders Should Consider

    With a long list of risks, losses associated with foreign exchange trading may be greater than initially expected. Here are the top 5 forex risks to avoid.
  7. Investing

    Introduction To Currency Futures

    The forex market is not the only way for investors and traders to participate in foreign exchange.
Frequently Asked Questions
  1. Interest Rate Risk Between Long-Term and Short-Term Bonds

    Find out the differences and effects of Interest rates between Long-term and short-term bonds. Read how interest rate risk ...
  2. How Are Dividends Pay from Exchange-traded funds (ETFs) ?

    Learn how Exchange-traded funds (ETFs) pay out the full dividend that comes with stocks held within the fund. Understand ...
  3. Who are Walt Disney's main competitors?

    Learn about how creating entertainment has been Walt Disney's niche since the 1920s, even as it faces ever-increasing competition ...
  4. Knowing the difference between EE and I bonds

    Read about the similarities and differences between the EE saving bonds and I savings bond programs created by the U.S. Department ...
Trading Center