The stock market lists thousands of companies, five days of week and investors try to sift through the data and then anxiously await the market opening and then nervously watch their trades until lunch time, when things slow down a bit.  As the afternoon wears on, people get tired and the rush of the morning is forgotten as the afternoon reaches its end. 

Right there we can see several reasons why stock trading is different from currency trading.  In the Forex market, there are only a limited number of currencies to work with.  Traders aren’t overloaded with thousands of choices and can concentrate on just a few currencies.  In the Forex market, the trading never stops.  That’s great if you live in a time zone that doesn’t have a stock exchange in it.  You don’t have to be up at odd hours of the night trying to fight off sleep to watch your positions.  You can trade when and where you want because the Forex market is always on.

The way that brokers make money is different as well.  In stocks, brokers charge a fee for every trade that is placed, but in Forex trading many brokers forego commissions altogether and make their profits on the spread between the buying price and the selling price.

Forex trading is also a lot more disparate than stock trading.  In stock trading, everyone is going through the same market.  If you trade Apple stock, then you will always be going through the NASDAQ exchange.  If you trade currency, there are different players.  If you’ve ever gone on vacation and changed money into the local currency at your hotel or on the street corner, then you were making a Forex trade, albeit on a small scale.  Try taking some stock certificates with you the next time you’re on a foreign vacation and exchanging those for a hotel room!  Because there are so many actors in currency trading, the market is much more fragmented.  Sometimes these different fragments of the market are connected by Electronic Communication Networks (ECNs).  In a stock market, nothing needs to be connected, because all trades are in the same market.

Stock brokers will let you trade on margin, but only at 2:1.  In other wise you can only borrow double what you already have invested.  With Forex trading the margin rate is much higher, meaning that you can often trade 100:1 or higher and can borrow a lot more money to make a trade.

Finally, the Forex market is huge.  Every day about 15 times more Forex currencies are exchanged than stocks. So if you have ever traded in a stock and seen a company plummet on what seems like some sort of market manipulation, you will have a lot less to worry about.  Currencies are harder to manipulate than stocks are because the amounts are so huge and because it requires several governments to cooperate to truly manipulate a price.  Economic data is harder to manipulate than the opinion toward a stock.  With a stock, all you have to do is create a rumor and watch the stock move.  With Forex, you have to fudge economic and political developments.  This also means that as a small player, if you load up on one currency, only to sell it later, you won’t see the currency move signicantly down when you sell it.  Try doing that with a small cap stock when as you try to unload it the price plummets.  Because the Forex market is so large trades are made instantly, instead of waiting for another stock trader to agree on a price.

All of these differences make Forex trading a totally different animal from stock trading, and I daresay more interesting!

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