Stocks have been a popular investment for hundreds of years. Companies issue stocks
to raise capital for expansion and new projects, and each share of the stock represents a
partial ownership in the company.
When the company does well and makes a profit, the value of the stocks rise. Stock
owners can sell their shares for a profit or hold on to the stock for even more gain in the
future. Sometimes companies will issue dividends – part of the profits that are distributed
to share holders.
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.
Stocks were traditionally seen as long term investments. So called 'blue chip' stocks -
those having proven value over many years - may form the backbone of an investment
portfolio. Short term trading is a relatively new phenomenon made possible with the
advent of Internet trading. Day traders attempt to take advantage of large daily
fluctuations in the market by buying and selling many times in one trading period. It is
relatively risky and any profits realized are reduced by broker commissions charged on
each transaction.
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.
FOREX
The Foreign Exchange Market (FOREX) is quite different from the stock exchange. In
contrast to the stock exchange, the FOREX 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 FOREX trades are commission free. Brokers earn money by setting a spread –
the difference between asking and selling prices.
The FOREX is the largest financial market in the world. It is handles transactions worth
$1.5 trillion every day. By comparison, all the American stock exchanges combined
handle daily transactions worth about $100 billion. 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.
The FOREX is not located in any one location. Trading markets are located world-wide
and because of difference in time-zones trades can be made 24 hours a day, 5 days a
week. Trading begins in Sydney, Australia on Monday morning (Sunday afternoon New
York time) and continues non-stop until Friday afternoon New York time.
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.
Other advantages of FOREX? It 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.
to raise capital for expansion and new projects, and each share of the stock represents a
partial ownership in the company.
When the company does well and makes a profit, the value of the stocks rise. Stock
owners can sell their shares for a profit or hold on to the stock for even more gain in the
future. Sometimes companies will issue dividends – part of the profits that are distributed
to share holders.
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.
Stocks were traditionally seen as long term investments. So called 'blue chip' stocks -
those having proven value over many years - may form the backbone of an investment
portfolio. Short term trading is a relatively new phenomenon made possible with the
advent of Internet trading. Day traders attempt to take advantage of large daily
fluctuations in the market by buying and selling many times in one trading period. It is
relatively risky and any profits realized are reduced by broker commissions charged on
each transaction.
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.
FOREX
The Foreign Exchange Market (FOREX) is quite different from the stock exchange. In
contrast to the stock exchange, the FOREX 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 FOREX trades are commission free. Brokers earn money by setting a spread –
the difference between asking and selling prices.
The FOREX is the largest financial market in the world. It is handles transactions worth
$1.5 trillion every day. By comparison, all the American stock exchanges combined
handle daily transactions worth about $100 billion. 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.
The FOREX is not located in any one location. Trading markets are located world-wide
and because of difference in time-zones trades can be made 24 hours a day, 5 days a
week. Trading begins in Sydney, Australia on Monday morning (Sunday afternoon New
York time) and continues non-stop until Friday afternoon New York time.
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.
Other advantages of FOREX? It 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.
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