How Forex, Stocks & Crypto Markets Work

Financial markets explained at the level most introductions stop at sound interchangeable: something has a price, you buy low and hope to sell high. The differences start one layer down, in who quotes the price, where the trade is recorded and who holds the asset afterwards. This guide compares forex, stock and crypto markets on those points, because each difference changes what can go wrong.

Three structures behind three prices

Forex: a network of dealers

There is no single currency exchange building. Banks, large dealers and electronic trading venues quote prices to one another, and retail brokers take prices from that network (or make their own, based on it). That is why two brokers can show EUR/USD a fraction of a pip apart at the same moment, and why "the" exchange rate is really a tight cluster of quotes.

Shares: listed on an exchange

A company's shares are admitted to trading on a regulated exchange such as the NYSE, Nasdaq or the London Stock Exchange. Orders from brokers meet in a central order book, alongside other lit and dark venues governed by best-execution rules. Price discovery is concentrated, and trades are reported publicly.

Crypto: many venues and a public ledger

Coins trade on hundreds of exchanges, each with its own order book, plus decentralised protocols that match trades using smart contracts. The underlying ownership record is the blockchain itself. Prices across venues are kept close by traders who buy where it is cheap and sell where it is dear, but gaps open during stress.

Opening hours and gaps

A stop-loss protects you less than it seems when a market gaps: if the price opens beyond your stop, the order fills at the first available price, not at the level you chose. Check live sessions on the market clock.

Who holds what you buy

This is the difference that matters most when something goes wrong.

• Shares through a regulated broker: you are the beneficial owner, and the shares are usually held in a nominee account separate from the broker's own assets.
• Forex and CFDs: you own a contract with the provider, not currency or shares. Your protection is the provider's authorisation, client-money segregation and, in some countries, a compensation scheme.
• Crypto on an exchange: the exchange holds the keys and your balance is a claim on it. Moving coins to a wallet you control removes that platform risk but makes you responsible for your own keys.

Leverage, settlement and oversight

For retail CFD clients in the UK and EU, leverage is capped at 30:1 on major currency pairs, 20:1 on gold and major indices, 5:1 on individual shares and 2:1 on crypto, with positions closed out when the margin level falls to 50% and negative balance protection in place. Unregulated platforms often advertise far higher ratios, which is exactly why the caps exist. Our margin calculator shows the collateral each ratio requires.

Settlement also differs. US share trades settle one business day after the trade date. A spot forex deal traditionally settles two business days later, although retail CFD positions simply roll over each evening at a financing cost. A crypto transfer settles when the network confirms it, which may take seconds or minutes depending on the chain.

Oversight follows structure. Stock exchanges and brokers are among the most heavily supervised firms in finance. Forex brokers are supervised where they are licensed, and the entity you sign up with matters. Crypto regulation is newer and uneven: some jurisdictions license exchanges and stablecoin issuers, others do very little.

How costs differ across the three markets

Every market charges you for access, but the charge takes a different shape in each. In forex, the spread is the main cost and financing is added for positions held overnight. In shares, you may pay a commission per order, a platform or custody fee, currency conversion on foreign stocks and, in some countries, a tax on purchases. In crypto, exchanges usually charge a percentage per trade, plus spreads on instant-buy screens and fees for moving coins on-chain.

These differences change which habits are expensive. Frequent trading punishes you most in markets where each round trip carries a visible spread; holding for long periods punishes you most where fees are charged on the value of the account each year. Trading fees explained breaks the charges down one by one.

Which market suits which purpose

None is "better". Shares give ownership of businesses and are the usual building block of long-term investing. Currency markets mostly serve trade, travel and hedging, and retail speculation in them is typically short-term and leveraged. Crypto combines a payments technology with a highly speculative asset class. Knowing that helps you judge whether a strategy you read about fits the market it is being applied to.

Sources

• UK Financial Conduct Authority, CFD leverage and margin close-out rules
• European Securities and Markets Authority, product intervention measures on CFDs
• US Securities and Exchange Commission, T+1 settlement cycle