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Chapter 2, Part II. And what about the stock market? Page 7

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

    Aug 28, 2009
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    At the end of this conversation I just specify the additional points that we’ve discussed already and that the FOREX market has and the Stock market does not:

    1. FOREX has no definite and strictly determined lot size – the lot size on stock market is specified by exchange rules;
    2. On the FOREX market, applied leverage that can reach as high as 500:1. In the stock market due to legislative rules, you usually can’t get more than 2:1
    3. FOREX has very low demand for start-up assets due to variable lot size and high leverage. The stock market typically demands greater assets for starting up a trading account.
    4. FOREX brokers provide clients with free “demo” software with real market quotes that could often be used for an unlimited period of time. Stock brokers also sometimes do this, but usually only for a short period since exchange quoting costs.

    Pipruit: Well, thanks Commander. Now it looks less obvious than before. The FOREX market looks simpler, cheaper and more available from a trading perspective. But the stock market is safer, although it’s more expensive. Also I understand that this kind of comparison makes sense only in terms of trading procedure and technical issues of market functioning. Not from market purposes. Because the major purpose of stock market is raising capital for private companies and the purpose of FOREX is currency changing.​

    Commander in Pips: You’re absolutely right about that comparison. You’re welcome. So let’s make some conclusions about couple of these different markets:

    Quality Stock market FOREX market
    24/5 market NO YES
    Absence of fees and commissions NO YES (many brokers)
    High leverage NO YES
    Expensive middlemen YES NO
    High entry barriers (initial assets) YES NO
    Free demo software for unlimited period of time NO YES (many brokers)
    Highly influenced by analyst opinion YES NO
    Could be driven by a large participant YES NO
    Stronger limitations on short selling YES NO
    Faster order execution and rarer slippage and delay NO YES
    All brokers have the same quotes YES NO (but usually close)
    Higher asset safety YES NO
    Higher government regulation YES NO

    P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon.

    Note: FPA ranks are earned in the battles against scam, not in the classroom.
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