While many are a part of the trading activity and investments that occur domestically each week in places such as the New York Stock Exchange (NYSE,) fewer are aware of the workings of foreign exchange (forex,) which may initially prevent them from being active in it. Renown international broker Pablo Soria de Lachica discusses the main differences that divide the two markets, and some of the ways one can acclimate self to the processes and guidelines for trading foreign currency, thus becoming competent and comfortable enough to undertake such transactions.
At its most simple definition, the forex is the market for various currencies around the world, and is largely rooted in global trade. It maintains a rate of exchange between two separate currencies. This rate can be used to purchase one against the other, and then later sell it for a profit when the value has increased past the original buying price — similar to the process of buying stocks. Aside from providing a floor for the buying, selling, exchanging and speculation of a particular country’s currency, the foreign exchange market also enables its conversion for international trade and investments.
The forex lacks a central exchange, such as the NYSE. The primary trading takes place over-the-counter through a spot market. There is no central location for price data, and no real volume information is available like it is within a domestic stock market. Traders who are making the move must be prepared to operate without it. “Since volume is an often reported figure in the stock market, the lack of it in spot forex trading is something which takes a bit of getting used to for those making the switch,” writes John Foreman of TradingMarkets.com.
Time is another aspect that will require some adjusting. Unlike the heavily-structured schedule followed by stock trading within a country, the global forex market operates 24 hours a day. As one major exchange closes, another located elsewhere in the world opens. Pablo Soria de Lachica notes that someone who is conditioned to the business hours style of domestic trading may need an extended period to get accustomed to the non-stop activity of the world market, which includes maintaining awareness of any international developments that may influence a particular currency one way or the other. Those who wish to try out the forex before getting monetarily involved can easily find practice software and websites that enables them to do so, a decision that Soria de Lachica strongly recommends.
Pablo Soria de Lachica is a globally renown broker and foreign exchange expert. A graduate of Universidad Tecnológico de México, Pablo manages numerous international financial transactions every year, using his expertise to offer an informed perspective on global economics. He also develops online trading tools for investors, while conducting market analysis and overseeing day-to-day financial operations for several prominent companies. Pablo presently collaborates with Kartoshka, a world leader in the creation of technology for sales, telemarketing and customer support. A devoted philanthropist, his community support includes the local Boy Scouts and Delta Epsilon Sigma programs.