Forex vs Equities Trading

Connections between the Forex and Stock Markets

The stock markets and Forex markets are not independent and most of the fundamental statistics that influence the rise and fall of currency markets affect the stock markets in the same way:

• If the stock market is experiencing a rally, the countries currency generally strengthens against other currencies
• If the US unemployment rises, this generally has a negative affect on both the stock markets and the currency
• If a country's trade deficit widens, both the stock market and the currency may be negatively affected

Of course Forex and stock markets also behave independently as well — Forex crosses are a relative difference between the two economies they represent while stock markets are local to the country where they are located.

Trading differences

If you are moving into Forex trading from trading stocks, there are a few benefits that Forex trading has to offer that you should be aware of:

• 24-hour trading
  Forex is traded around the clock so you can enter and exit positions whenever you like. Unlike stock markets which open and close at scheduled times and the price in between can be uncertain, Forex markets are seamless and allow you to trade to your own schedule.
• Live execution at displayed prices
  The liquidity (trading volume) in major currency crosses is so large that we can guarantee that your trade will be executed at the price displayed up to large trade volumes. If the price is displayed in green, that is the price you can rely on. You don’t need to wait until your trade has been routed to an exchange order book to tell you at what price your order was filled at as with stock trades.
• Direct Short Selling
  In fact, there is no such thing as short selling in Forex trading to take advantage of a downward price trend. Selling EURUSD simply means you are buying Dollars using Euros (because you believe the Dollar is going to strengthen against the Euro). There are no up-tick or complicated rules you need to be aware of, like in the equity markets.
• Commission-free trading
  Sounds too good to be true? The way we make our money at Saxo Bank is from the small difference between the ask price (the buy price) and the bid price (sell price) for the Forex cross. For small trades we have to cover our costs but for trades above our minimum threshold, we do not charge additional commissions.