The largely uncontrolled forex market allows traders to effortlessly trade with the trend. Traders trade regardless of whether it is going up or down. Stock market traders, are frequently forced to consider other aspects as compared to forex market traders. This is as a result of legislation designed to prevent stock market collapses.
Following the multiple stock market collapses in recent memory, the stock market has undergone significant rule revisions. These laws have helped to prevent market collapses. At the same time these deregulations have made it extremely difficult to short stocks in severely dropping markets.
Stocks tend to move in response to the forecast for a specific firm or the market as a whole. In a bull market, underperforming stocks will appreciate. Whereas solid stocks with great earnings will decrease in a bear market. This decrease will probably be not as much as the general market.
The good news for forex traders is that, in this critical aspect, the foreign exchange market differs from the stock market. This is due to its relative lack of regulation. At any moment you can locate a price. And thus you can go long or short on almost any currency pair.
In the currency market, bull and bear markets are equally straightforward to trade. It’s unlike in stock markets, where short selling restrictions may apply.
Because the forex market is mostly uncontrolled, the flow of orders and supply and demand market forces govern its movements. However central banks may occasionally interfere to smooth out severe or unfavorable exchange rate swings in their country’s currency.
Furthermore, because currencies trade in pairs, they cannot all fall in value at the same time in the forex market. This is in contrast to stocks. Where in a typical bear market crash scenario, practically all stocks in a given market might fall. This is why the Securities and Exchange Commission (SEC) has enacted such harsh short-selling regulations for stocks.
Overall, the forex market’s increased independence tends to make it more efficient. It allows traders to profit equally and readily from bull or bear markets in one or more currency pairings.