In trading on the financial markets, as in any business, there are supporters and opponents of the individual areas. The financial markets are the gold market, the stock market (stock market) Forex (foreign exchange market), various commodity markets. Consider that a financial market can not be isolated from the others, because all processes in the world economy in any way linked. The situation in the stock market can have a significant impact on currency rates at Forex (foreign exchange market), which in turn can have an impact on the gold market. There may be also valid and the converse. In this chapter we confine ourselves to comparing the Forex market and the stock market, find out the advantages and disadvantages of each of its members (brokers, dealers, Internet traders).
Before this chapter, we have thoroughly learned the basics of the Forex market.Now we look at the stock market. On the stock markets traded equity instruments,or as they are called, securities. A security - is a kind of certificate of ownership of capital, the right of disposal which is transmitted on a permanent or temporary basis to others for the right to participate in the profits generated by this capital. In other words, getting the security we put our money into something that we expect to be profitable. Thus, the equity instruments - are documents that contain any of the rights of property that could be implemented in the presentation of. Accepted distinguish the following main types of securities: stocks, bonds, derivative securities (warrants, futures, options), savings and certificates of deposit andpromissory notes. Let's say a few words on each of the species listed securities.
Stocks are the main type of securities and determine the ownership rights of the holder in the profits of the company. The holder of the shares, in fact, has a stake in the company. There are registered shares, bearer shares, common shares andpreferred shares. The first two variants speak for themselves. Ordinary shares are entitled to vote at the general meeting of shareholders, and the size of dividends paid is determined by the annual financial results of the company. On preferred shares pay a fixed dividend, but the right to vote at shareholders' meetings, they do not give. As you can see, shares give their holders the right to not only capital but also the right to receive income in the form of dividends.
A bond is a debt security. It confirms that a loan to the issuer (who issues bonds in circulation) in cash in exchange for the right to make a profit otherwise specified manner. Usually profits obtained in the form of a fixed annual percentage of the value of production, or the nominal value of the bonds. There are government and corporate bonds. Government bonds are more reliable, but less profitable. Corporate bonds, on the contrary, more profitable, but less reliable. As in any other case the return and risk of owning bonds linked directly dependent - the higher the risk, the higher the yield.
Like Forex, the stock market has derivative financial instruments. Derivatives Forex been discussed in the relevant chapter, now let's talk about derivative equity instruments. Warrant - is a security, which defines the right to buy / sell shares under certain conditions or in exchange for shares.Futures - is a security, which is a standard contract for the purchase / sale of a certain number of shares in the future at a price fixed at the time of the futures. As a buyer and seller of the shares required to fulfill the terms of the futures. To guarantee the fulfillment of the conditions of the futures both parties must pay a deposit, the amount of which is set by the exchange, and stored on the stock exchange on which the transaction occurs. Option - is a security similar to futures except that it does not impose obligations on the buyer, but only gives the right to their execution.American type option gives the right within a certain period. The European type of option gives the right on the expiration of a certain period. The seller of the option is obliged to fulfill the terms of the contract, so it carries a risk. For such risks the option buyer pays the seller of the option premium. If the buyer of the option ultimately rejects the terms of the deal, he loses the prize. Sold to ensure the implementation of the deal on the option to post bail, which as in the case of the futures exchange is set and stored on the Exchange. In fact, the subject of options trading is the sum of the premium paid by the buyer.
The securities also include certificates. Certificate - is written evidence of the bank's contribution of funds which give the investor the right to receive after a certain period of the deposit amount and accrued interest thereon. The deposit certificate shall be issued if the depositor is a legal entity. Savings Certificate issued If the depositor is a natural person.
Bill - a kind of debt instrument that gives the right to demand payment of the sum indicated in it after the expiration of the term for which he was discharged. There are simple and bills of exchange. A promissory note - is a promise to pay a certain sum, which the debtor is discharged and transferred to the creditor. A bill of exchange (draft) - on the contrary, issued the creditor and must be either accepted, or challenged by the debtor. In the case of acceptance of the debtor agrees to pay a certain amount of the promissory note.
Now that we understand what the financial instruments traded on the stock market, we shall understand the peculiarities of trading. In contrast to Forex, the stock market has a spatial limitation - the venue is a trading stock exchange. Stock exchanges are located in major financial centers around the world, and the variety and stock quotes on the various stock exchanges may vary. However, with the development of telecommunications and the Internet stock exchanges were able to quickly exchange quotations, to reduce to the minimum holding arbitrage.Arbitrage transactions involve the purchase of shares on a stock exchange and their subsequent sale to another at a favorable rate. On the Forex arbitrage operations can not be due to the fact that the foreign exchange market has no central trading locations.
For transactions of purchase / sale on the stock market requires that the buyer and seller have found each other. Due to the fact that the number of participants is limited to one stock exchange, liquidity, operations on shares is much lower than with currency operations on Forex. On the stock market you can not find a buyer for its shares, and incur significant losses if your stock fall much in price. In contrast to Forex, the stock market to profit by speculative operations can only be guided by the appreciation. In other words, you first need to buy shares at a cheaper price in order to sell them more expensive. Unable at first to sell the shares, which you do not. However, there are mechanisms to circumvent this limitation, when it is possible to carry out a fictitious sale of securities without having them in stock, with a commitment to make the inverse operation - supported by the exchange intermediaries to private traders of the stock market.
In the stock market you can not enjoy the benefits of margin trading, as it takes place in the Forex market. You can buy stock only with your own cash. After all, the shares may be purchased not only for the purpose of speculation. As mentioned above, the shares are entitled to capital organizations allowed to participate in voting at the general meeting of shareholders, the dividend is paid on them. Therefore, you can buy shares and not with a view to their subsequent sale. In this case, the concept of open and closed position loses its meaning, exactly like the credit you as a trader providing leverage.
In contrast to the Forex market, which operates around the clock at the stock market, there are certain hours of opening and closing. This watch is determined by the time the work of the relevant stock exchange (typically 8 hours on weekdays), which carried out the auction. If you use the Internet for trading on the Stock Exchange, and are with her in the same time zone, it brings some inconvenience to trading. Opening hours Stock Exchange may fall at night in your area that makes you keep nocturnal. Therefore, in the Forex market, at the expense of round the clock work, you have more opportunities for trading.
To work successfully in the stock market is not enough use of the review mechanisms inherent to the Forex market. Technical analysis and fundamental analysis can be used to predict the change in quotations of shares, but the micro economic factors affecting the company's activities are also important. To make the right decision and purchase / sale of shares must have access to the financial statements, information on personnel changes in the company's government orders for its products. When it comes to foreign companies, such information is only available from foreign sources: television, newspapers, magazines, the most published financial statements. Naturally, this information is published in a foreign language, which introduces significant difficulties in its study and understanding.
It should be noted that, unlike financial instruments on Forex, have examined the financial instruments of the stock market has its advantages. This dividend on the shares and the opportunity to participate in the management of the company, the repayment of government securities, coupon payments on bonds. These benefits are partially reduce the risk of losses in the stock market.
In this chapter we have tried to compare the Forex market and the stock market. We found that each has its advantages and disadvantages, each in its own attractive to investors. In the next chapter we will look at the correlation (correlation) in these markets and understand how to predict one market can help in the decision of purchase / sale on the other.
Before this chapter, we have thoroughly learned the basics of the Forex market.Now we look at the stock market. On the stock markets traded equity instruments,or as they are called, securities. A security - is a kind of certificate of ownership of capital, the right of disposal which is transmitted on a permanent or temporary basis to others for the right to participate in the profits generated by this capital. In other words, getting the security we put our money into something that we expect to be profitable. Thus, the equity instruments - are documents that contain any of the rights of property that could be implemented in the presentation of. Accepted distinguish the following main types of securities: stocks, bonds, derivative securities (warrants, futures, options), savings and certificates of deposit andpromissory notes. Let's say a few words on each of the species listed securities.
Stocks are the main type of securities and determine the ownership rights of the holder in the profits of the company. The holder of the shares, in fact, has a stake in the company. There are registered shares, bearer shares, common shares andpreferred shares. The first two variants speak for themselves. Ordinary shares are entitled to vote at the general meeting of shareholders, and the size of dividends paid is determined by the annual financial results of the company. On preferred shares pay a fixed dividend, but the right to vote at shareholders' meetings, they do not give. As you can see, shares give their holders the right to not only capital but also the right to receive income in the form of dividends.
A bond is a debt security. It confirms that a loan to the issuer (who issues bonds in circulation) in cash in exchange for the right to make a profit otherwise specified manner. Usually profits obtained in the form of a fixed annual percentage of the value of production, or the nominal value of the bonds. There are government and corporate bonds. Government bonds are more reliable, but less profitable. Corporate bonds, on the contrary, more profitable, but less reliable. As in any other case the return and risk of owning bonds linked directly dependent - the higher the risk, the higher the yield.
Like Forex, the stock market has derivative financial instruments. Derivatives Forex been discussed in the relevant chapter, now let's talk about derivative equity instruments. Warrant - is a security, which defines the right to buy / sell shares under certain conditions or in exchange for shares.Futures - is a security, which is a standard contract for the purchase / sale of a certain number of shares in the future at a price fixed at the time of the futures. As a buyer and seller of the shares required to fulfill the terms of the futures. To guarantee the fulfillment of the conditions of the futures both parties must pay a deposit, the amount of which is set by the exchange, and stored on the stock exchange on which the transaction occurs. Option - is a security similar to futures except that it does not impose obligations on the buyer, but only gives the right to their execution.American type option gives the right within a certain period. The European type of option gives the right on the expiration of a certain period. The seller of the option is obliged to fulfill the terms of the contract, so it carries a risk. For such risks the option buyer pays the seller of the option premium. If the buyer of the option ultimately rejects the terms of the deal, he loses the prize. Sold to ensure the implementation of the deal on the option to post bail, which as in the case of the futures exchange is set and stored on the Exchange. In fact, the subject of options trading is the sum of the premium paid by the buyer.
The securities also include certificates. Certificate - is written evidence of the bank's contribution of funds which give the investor the right to receive after a certain period of the deposit amount and accrued interest thereon. The deposit certificate shall be issued if the depositor is a legal entity. Savings Certificate issued If the depositor is a natural person.
Bill - a kind of debt instrument that gives the right to demand payment of the sum indicated in it after the expiration of the term for which he was discharged. There are simple and bills of exchange. A promissory note - is a promise to pay a certain sum, which the debtor is discharged and transferred to the creditor. A bill of exchange (draft) - on the contrary, issued the creditor and must be either accepted, or challenged by the debtor. In the case of acceptance of the debtor agrees to pay a certain amount of the promissory note.
Now that we understand what the financial instruments traded on the stock market, we shall understand the peculiarities of trading. In contrast to Forex, the stock market has a spatial limitation - the venue is a trading stock exchange. Stock exchanges are located in major financial centers around the world, and the variety and stock quotes on the various stock exchanges may vary. However, with the development of telecommunications and the Internet stock exchanges were able to quickly exchange quotations, to reduce to the minimum holding arbitrage.Arbitrage transactions involve the purchase of shares on a stock exchange and their subsequent sale to another at a favorable rate. On the Forex arbitrage operations can not be due to the fact that the foreign exchange market has no central trading locations.
For transactions of purchase / sale on the stock market requires that the buyer and seller have found each other. Due to the fact that the number of participants is limited to one stock exchange, liquidity, operations on shares is much lower than with currency operations on Forex. On the stock market you can not find a buyer for its shares, and incur significant losses if your stock fall much in price. In contrast to Forex, the stock market to profit by speculative operations can only be guided by the appreciation. In other words, you first need to buy shares at a cheaper price in order to sell them more expensive. Unable at first to sell the shares, which you do not. However, there are mechanisms to circumvent this limitation, when it is possible to carry out a fictitious sale of securities without having them in stock, with a commitment to make the inverse operation - supported by the exchange intermediaries to private traders of the stock market.
In the stock market you can not enjoy the benefits of margin trading, as it takes place in the Forex market. You can buy stock only with your own cash. After all, the shares may be purchased not only for the purpose of speculation. As mentioned above, the shares are entitled to capital organizations allowed to participate in voting at the general meeting of shareholders, the dividend is paid on them. Therefore, you can buy shares and not with a view to their subsequent sale. In this case, the concept of open and closed position loses its meaning, exactly like the credit you as a trader providing leverage.
In contrast to the Forex market, which operates around the clock at the stock market, there are certain hours of opening and closing. This watch is determined by the time the work of the relevant stock exchange (typically 8 hours on weekdays), which carried out the auction. If you use the Internet for trading on the Stock Exchange, and are with her in the same time zone, it brings some inconvenience to trading. Opening hours Stock Exchange may fall at night in your area that makes you keep nocturnal. Therefore, in the Forex market, at the expense of round the clock work, you have more opportunities for trading.
To work successfully in the stock market is not enough use of the review mechanisms inherent to the Forex market. Technical analysis and fundamental analysis can be used to predict the change in quotations of shares, but the micro economic factors affecting the company's activities are also important. To make the right decision and purchase / sale of shares must have access to the financial statements, information on personnel changes in the company's government orders for its products. When it comes to foreign companies, such information is only available from foreign sources: television, newspapers, magazines, the most published financial statements. Naturally, this information is published in a foreign language, which introduces significant difficulties in its study and understanding.
It should be noted that, unlike financial instruments on Forex, have examined the financial instruments of the stock market has its advantages. This dividend on the shares and the opportunity to participate in the management of the company, the repayment of government securities, coupon payments on bonds. These benefits are partially reduce the risk of losses in the stock market.
In this chapter we have tried to compare the Forex market and the stock market. We found that each has its advantages and disadvantages, each in its own attractive to investors. In the next chapter we will look at the correlation (correlation) in these markets and understand how to predict one market can help in the decision of purchase / sale on the other.
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