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Chapter 2, Part II. And what about the stock market? Page 5

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 14, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    MYTH #8 FOREX has no restrictions on short selling.

    True

    The stock market has some restrictions on short-selling stocks. Sometimes short selling could be forbidden by regulating authorities and/or the exchange itself, for example, during a financial crisis or some strong geopolitical events, such as a war starting or terrorist attacks. Also most exchanges have limitations for price movements of stocks in one direction during a day. If this limit is reached, the exchange can interrupt trading for some time. The FOREX market does not have all these restrictions, because, as we already know, during transactions one currency is buying but another always selling, so there is no big structural difference in whether you short or long on particular pair. You may do what you want, at least as long as you can find a counterparty for your trade on the market. But as we’ve investigated before, there are few problems on the FOREX market with that due to extremely high liquidity.​

    MYTH #9 All FOREX brokers have the same quotes and charts, just like stock brokers.

    False

    In fact, on the FOREX market, quotes at the same moment of time can be different with different brokers, but should be close if they are really connected to large banks. Moreover, the charts of price action that brokers provide depend on broker’s time zone location. Because FOREX is 24-hour market and the stream of quotes never stops (except on the weekend), the start of the chart for the current day, for example in Japan and in UK, can be different. This makes technical analysis on the FOREX market using daily charts a bit tricky.

    On the stock market all brokers have the same quotes at the same time, because they are transferred from the exchange (NYSE for example) directly. Even more, you can check every tick that happened during the trading session, because all trades fix and write in the exchange database. This leads to particular nuance that is very important. For example, on the stock market if your stop order has been hit and there is no such price in the exchange’s database, you can file a lawsuit against your broker and you should easily win. Alternatively your stop order execution should be canceled in this case. On the FOREX market you can’t do this, because it has no absolute center of quoting. This is just a community and every member can generate his own quotes. This can lead to some difference in quoting with different brokers. And there is no way to prove which price is truly had place on the market at particular period of time and which one had not.​
     
    #1 Sive Morten, Dec 14, 2013
    Lasted edited by : Feb 5, 2016
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