Differntiate between Forex & Stocks | ForexGen Tips

A currency quote is listed differently from a stock quote. Stocks are quoted in terms of price per

share. Currency exchange prices are listed as either a direct quote or an indirect quote. A direct

quote uses the domestic currency as the base and the foreign currency as the quote. An indirect quote

works the exact opposite way.

So, if you were to view a quote in an American newspaper that said USD/JPY = 75, that would be a

direct quote and would mean that $1 of U.S. currency is equal to 75 Japanese yen. If that same quote

appeared in that same American newspaper and was listed as JPY/USD = 0.013, that would be an example

of an indirect quote.

As with stock prices, currency exchange prices have a bid and ask spread. The current bid is the

amount of foreign currency that someone is willing to spend in order to buy $1 U.S. base currency.

The ask is the amount of foreign currency that someone is demanding in order to be willing to sell $1

U.S. base currency.

The Forex markets are generally considered to be less volatile than then stock market because within

the course of a trading day, it is highly unlikely for the value of a single currency to move all

that much. With equities, it is not uncommon for a trader to buy a stock, and then a negative press

release causes the stock to lose considerable value within a day or even a couple of hours.

Sometimes, however, the Forex can be volatile. If there is a significant economic or political

development with a certain country, the currency of that country can lose value quickly.

There is a higher degree of liquidity on the currency exchange then there is on the stock exchange

because the currency exchange is open 24 hours per day and because the very nature of currency

exchange is to bet on when certain currencies will go up or down; so, it is easy to sell your

position in a certain currency even when the value of that money is going down. A plummeting stock is

more difficult to unload, but not impossible.

If you want to begin currency tranding, try to set aside some money and open an account with an

online broker. Start slowly, then as you get the hang of it, work your way up to larger trades and

higher volume. However, do not gamble your nest egg on currency trading because inexperienced traders

can lose everything they have rather quickly in spite of the relative safety of the Forex market.
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