FOREX or FX versus Stocks Stocks and bonds have been popular investments for hundreds of years. Companies issue stock to raise capital for startup, expansion and new projects, and each share represents a partial ownership of the company. When the company does well and earns a profit, the value of the shares rise. Share owners can sell their stocks for a profit or hold on to the shares for even more gain in the future. Sometimes companies will issue dividends which are part of the profits that are distributed to share holders. Stocks are traded on stock exchanges or bourses. 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 their shares listed on several exchanges. Stocks were traditionally viewed as long term investments. So called 'blue chip' stocks, or those having proven value over many years, may form the basis of an investment portfolio. Short term and day trading are 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 small profits realized are reduced by broker commissions charged on each transaction. Stocks may sometimes be bought on margin, meaning that the investor borrows money from the broker to buy the stocks. Margin rates are usually around 50% meaning the investor can borrow as much as half the value of the stock. FOREX The Foreign Exchange Market "FOREX" or FX is quite different from the stock exchange. In contrast to the stock exchange, the FOREX is primarily a short term market. Many traders enter and exit trades within a 24 hour period, often 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 and traders use sophisticated but low cost and very easy to use even for newbies Trading software. Brokers earn money by setting a spread being the difference between asking and selling prices. The FOREX is the largest financial market in the world. It is handles transactions worth $2.5 trillion every day. By comparison, all the American stock exchanges combined handle daily transactions worth about $200 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 markets are 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 differences 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. Some other advantages of the FOREX market? 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.