The foreign exchange market is also called forex market, or the FX market. The forex market was established in the early 1970′s. The basis of forex market is the trading between two countries having different currencies. The FX market is not based on investing in any one business. It is based on selling and buying of currencies.
Currencies of all countries are traded on the forex markets. Every currency has it own three-letter code or symbol. This symbol is unique and no two currencies can have a same symbol. For example, the United States dollars is represented by the symbol USD and the symbol for the Japanese yen is JPY. Similarly British pound sterling is symbolized by GBP while EUR stands for the Euro. The three-letter symbol for Australian Dollar is AUS. You will find a lot of other symbols representing the other currencies of countries.
The vast trading involves in the forex market differentiates it from the stock market. In foreign exchange market, millions of millions dollars are traded daily. An estimated amount of Two Trillion Dollars are traded daily on FX market. This amount is extremely higher than the money traded in stock market of any country of the world. Many governments, financial institutions, banks and other similar institutions are involved in forex market trading. What is traded on the FX market is something that is highly liquidated. It means that it can be converted to cash very fast and often times. The availability of liquidity in the foreign exchange market is very high for any investor belonging to any country of the world.
Another difference between the forex market and the stock market is that forex market has no geographical boundaries. It is global and worldwide. While trading in stock market takes place only within the country. The stock market is based on business and commodities within a specific country while forex market may include any country.
The forex market has no office hours. It is open round the clock, 24 hours a day due to the involvement of large number of countries located in many different time zones. As market in one country is closing, another country is opening its market. On the other hand, the stock market has set business hours. It usually follow business day and do not operate during banking holidays and weekends. Forex market do not have such restrictions.
The stock market of a country is based on the currency of that country only. For example Canadian Dollars and the Canadian Stock Market, or Japanese Yen, and the Japanese Stock Market. While in FX market, people are involved with many types of currencies of different countries. This is a significant difference between the foreign exchange market and the stock market.
