• Forex Market

Trading currencies in a market is known as FOREX. The Forex market is a place for individuals, businesses, financial institutions, the public sector and nations to make a profit off the varying currency prices. This is done through judging which currencies rise and fall against other currencies. These currencies are traded in pairs. This generally means that every currency will pair against every other currency and have a price. For instance, if you are trading between sterling pounds (GBP) and US dollars (USD) and both currencies fall 10%, you are in the same spot as you were before. You wouldn't make a loss if you used either currency to buy the other because their ratio will be similar.

The FOREX market is primarily a short term market. Most traders enter and exit deals within a 24 hour period – sometimes within a few minutes. Many FOREX trades can be made in one day without building up a large brokerage fee because most of FOREX trades are commission free. Brokers earn money by setting a spread – the difference between asking and selling prices.

Forex Market is an over-the-counter market (OTC). This means it a global market with no centralized trading area. The Forex Market will be available to anyone twenty-four hours a day, five days a week.

The huge volume of FOREX means that it is one of the most liquid markets in the world. There is always a buyer and seller for any type of currency because the world economy relies on the movement of goods from country to country. The stock market is less liquid because participants may choose to hold their investments or move on to other markets.

When two currencies are traded it is known as a currency. This is how the currencies are trade in the Forex market. There will always be a set of currencies that are more popular to trade with. These are high volume currencies and it is unnecessary to study all the currencies as each requires a great deal of study. The main idea behind successfully trading in the Foreign Exchange Market is to create a strategy that works for the investor.

• Stock Market

The stock market is one of the more traditional ways to create a profit from an investment. The stock market can produce double digit profits compared to the return from bonds, but it is not the easiest market to take part in. Trying to achieve 20% to 30% gains in short periods of time creates a lot of risk as well as uncertainty. The investor would have to perform vast amounts of research, which would still not be a guarantee. This is because it is never known when a company would decide to fold or go bankrupt.

Stocks are traded on stock exchanges. Most stocks are bought and sold through brokers who charge a commission or fee for this service. American stock exchanges include the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation System (NASDAQ). Most stocks are only listed on one exchange, although large companies may have listings on several exchanges.

A person with little knowledge about stock market can still make a profit. For instance, knowing that blue chip stocks don't lose value, would allow the person to invest in it and still create a profit. Another added advantage of the stock market is that it is good for long term investing. Investment trusts and unit trusts are the most popular long term investments.

Stocks may sometimes be bought on margin, meaning that the investor borrows money to buy the stocks. Margin rates are usually around 50% - the investor can borrow as much as half the value of the stock.

Stock exchanges have more limited trading hours. While it is possible to trade on exchanges world-wide, each exchange is independent and operates for just 7 hours a day. There is no way to buy or sell a certain stock that is only traded on one stock exchange when that exchange is closed.

Forex Is More Predictable Than Stocks. It follows well established trends; it allows high leverage – typically 100:1 instead of 2:1 on the stock market; and it doesn't require a large investment – mini accounts as small as $250 can get you started in FOREX.