Three things to take away
- Stocks trade on regulated exchanges in set hours; forex is a round-the-clock dealer network on weekdays; crypto runs every day on independent venues.
- What you actually own differs: a share, a contract with a provider, or a coin you or an exchange controls.
- Investor protections are strongest in regulated stock and forex markets and patchiest in crypto.
Financial markets explained in their simplest form are places where buyers and sellers agree a price. That description fits a stock exchange, the currency market and a crypto exchange equally well, which is why they are easy to confuse. Look closer and they differ on almost everything that matters to your safety: who runs them, when they open, what you own after you buy and who steps in if something goes wrong.
Financial markets explained: three structures
Stock markets
Shares are listed on exchanges such as the New York Stock Exchange, Nasdaq, the London Stock Exchange or the Tokyo Stock Exchange. The exchange runs a central order book under a published rulebook, and listed companies must publish regular financial reports. Individuals reach the exchange through a licensed broker.
The forex market
Currencies have no central exchange. Banks, large dealers and electronic trading networks quote prices to one another, and retail traders usually deal through a broker, often in the form of a contract for difference (CFD) or a rolling spot contract. Prices from different providers are close to one another but not identical.
Crypto markets
Coins and tokens trade on hundreds of independent exchanges around the world, plus decentralised trading protocols that run as software on a blockchain. Each venue has its own order book and its own rules, and the level of supervision depends heavily on where the venue is based.
When each market is open
| Market | Regular hours | What it means for you |
|---|---|---|
| US stocks | 09:30 to 16:00 New York, Monday to Friday | News outside the session shows up as a jump, or gap, at the next open. |
| London stocks | 08:00 to 16:30 London, Monday to Friday | Overlaps with New York in the afternoon, UK time. |
| Forex | Sunday 17:00 to Friday 17:00 New York | Open overnight on weekdays, closed at weekends. |
| Crypto | 24 hours, 7 days | No closing bell, so prices can move sharply while you sleep. |
The live board on our homepage shows which of these are open at this moment in your own time zone.
What you own after you press buy
This is the difference most beginners miss. Buy a share through a regulated broker and you become the beneficial owner of that share, usually held for you in a nominee account that is legally separate from the broker's own assets. Open a forex or CFD position and you own a contract with the provider: you gain or lose on the price, but you do not own any currency. Buy a coin on an exchange and you hold a claim against that exchange unless you move the coin to a wallet you control, in which case nobody can reverse your mistakes.
Regulation and protection
Stock brokers and forex providers in major financial centres must be authorised, must keep retail client money separate from their own, and in many countries are covered by a compensation scheme up to a limit. In the UK and EU, retail CFD clients also benefit from leverage caps, negative balance protection and a ban on bonus offers.
Crypto supervision has expanded, with registration and licensing regimes in many countries, but coverage is uneven and compensation schemes rarely apply to crypto-assets. That does not make crypto automatically unsafe, but it does mean more of the checking falls on you. Our guide on how to choose a broker applies to exchanges too.
Leverage in each market
Leverage lets a small deposit control a larger position. Under UK and EU rules, retail clients are limited to 30:1 on major currency pairs, 20:1 on gold and major indices, 5:1 on individual shares and 2:1 on crypto CFDs. US retail forex is capped at 50:1 on major pairs. Offshore platforms may offer far more, which is one reason they attract complaints. Use our margin calculator to see how much of your balance a leveraged position ties up.
How prices move
- Stocks respond to company earnings, interest rates and the general economic outlook.
- Currencies respond mainly to interest-rate expectations, inflation, economic releases and shifts in global risk appetite.
- Crypto responds to adoption news, regulation, liquidity and sentiment, and tends to move much further in a day than a major currency pair.
Settlement and costs
US share trades settle one business day after the trade (T+1). A crypto transfer settles on its blockchain, usually within minutes, and cannot be reversed. Forex CFD positions do not settle into currency at all; instead they carry an overnight financing charge or credit while open. Costs differ as well: commissions and currency conversion for shares, spreads and financing for forex, and trading plus network fees for crypto. Trading fees explained goes through each.
Which market to learn first
There is no correct order, but it helps to learn the market you are most likely to be approached about. If an advert promised currency profits, start with how forex trading works. If you are thinking of long-term investing, read the stock market for beginners. If a friend keeps mentioning coins, begin with how crypto works.
Reader questions
Which financial market is safest for beginners?
No market is free of risk. Regulated stock markets offer the strongest investor protections, but share prices can still fall a long way. Leveraged forex and crypto products add the risk of fast, large losses.
Why are forex prices slightly different between providers?
The currency market has no central exchange, so each provider quotes from its own sources and adds its own spread. Differences are usually small on major pairs but can widen during fast markets.
Is crypto a financial market like stocks?
It works as a market, with buyers, sellers and prices, but it is spread across many independent venues and is regulated far less consistently than stock exchanges.
Sources
- UK Financial Conduct Authority, CFD and client asset rules
- European Securities and Markets Authority, product intervention measures on CFDs
- US Securities and Exchange Commission, T+1 settlement rule