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januson

Forex or Equities?

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Is there any difference between trading currency pairs or trading stocks? I'm thinking in terms of technical analysis and trading indicators?

 

I'm very new to forex so please understand any eventually stupidness :)

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(1) Once inside a trendy move, sometimes the currencies have very shallow pullbacks compared to equities. Another word, they can be very over-sold and stayed very over-sold for an extended period of time.

(2) On a micro time frame, lets say on a one minute chart or 15 seconds chart, the currency price action can be very erratic.

(3) Because there is no centralized exchange for the Forex, as far as I understand, there is no actual volume information or tickcharts

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You can do tick charts on any spot pair (i.e. EURUSD). If you want actual quoted volume you'll have to go to a regulated contract on the CME (i.e. @EC).

 

Very different markets.

 

I think for learning how to do technical analysis Forex is a better alternative. You don't have to worry about finding a new stock to watch and analyze, you can just focus on one currency pair and leave it at that. There is also a lot of forex-specific education available for new traders, and I feel MUCH MUCH more is available for the noobie in materials for Forex than in equities.

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Thank you both.

I've found BabyPips, do you have other good places?

 

Why is the volume gone in spotpair?

 

 

If you read the forex forums on here, you will find several discussions about volume, or rather lack of, in forex, as well as a lot of other really good threads. I'm surprised you haven't read them already.

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Is there any difference between trading currency pairs or trading stocks? I'm thinking in terms of technical analysis and trading indicators?

 

I'm very new to forex so please understand any eventually stupidness :)

I think Technical Analysis works much more better on Forex. Don't know why, probably because it's 24-hour live, or for stocks, fundamental analysis is more important.

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IMO, price action is forex tends to be pretty much symmetrical. If you flip a chart of EURUSD upside down, you really don't have to change your system to effectively trade it. I've found that good mechanical systems for forex usually have the same parameters for long or short.

Since stocks as a whole tend to have an upward bias. Price declines in stocks tend to behave differently than rallies. I've found that mechanical systems for stocks can often perform better with different parameters for short vs. long.

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One point apart all the rechnical stuff I oversaw when I decided to go for Forex daytrading was:

 

The 24 hour market puts A LOT of psychological stress on you! Things like 'you go out for dinner, come back and see the move you've been waiting for all week has started without you' will happen frequently. And this is only one example of the mental challenges you will face. I hope you can cope with them.

Regular market hours, like exchanges deliver, give you peace of mind before and after the bell...Forex will occupy your mind around the clock. If you are an end of day trader all this might not be relevant to you though.

 

All the best for your decision,

Flojo

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Here are some of my thoughts on how technical analysis may differ with Forex than when trading stocks.

 

Some quick notes on volume. The volume on many broker charts, if they have it, is often only the volume of their clients. Apparently Esignal charts gather volume from many brokers and banks so this gives a better proxy of volume than other sets of charts. Since there are thousands of banks and brokers around the world and Spot FX is an over-the-counter market with no central clearing, there is no true volume available.

 

Prices on charts will vary from one set of charts to the next due to different spreads, liquidity providers and broker manipulation unlike a single set of prices for regulated markets like stocks and futures.

 

Since so many free real time charts are available, it is wise to have more than one set running to compare prices and in case one set is frozen or is disconnected.

 

Gaps are rare in the FX market compared to stocks and futures due to huge liquidity and 24 hour nature. Most often they are only seen over the weekend or after major world event news.

 

Opening range and start of day breakout strategies may be less effective due to the 24 hour nature of the market. Start of session strategies at the open of country's market are sometimes used instead (e.g. Japan open for Yen pairs, European open or London open for European pairs and the Pound and NY open for all USD pairs especially America's pairs such as USD/CAD and USD/MXN).

 

Start of day strategies may prove difficult as daily candles may start at different times of day on different charts. This also means indicators on daily charts may show different readings from chart provider to chart provider.

 

Similarly, since different charts start at different times, any candle greater than 1 hr and less than 1 week can look different from chart to chart as the start time is different. For example 4 hr candles on GMT charts can appear entirely different than on GMT +2 charts.

 

Charts with Sunday bars can really cause problems with indicators such as Average Daily Range, Average True Range, Pivot Points, Moving Averages etc., especially on daily charts. The Sunday candle is always just for a number of hours instead of a full day.

 

One other matter is time zones and daylight savings times. One really needs to be on top of what countries and markets use DST and when they change back to regular time. Same with some charts. One needs to check to see if chart time zone has changed. Also some charts stay at same GMT offset year round and others change to DST and back at chart provider's home office time or at the chart providers whim. Sometimes they change to DST and back late. Some charts allow one to change the start of day time or time zone, others do not.

 

Charting problems can be overcome but you need to be aware of them. One can often avoid certain sets of charts for certain strategies or get customized indicators to deal with these matters.

 

WRR

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Thank you both.

I've found BabyPips, do you have other good places?

 

Why is the volume gone in spotpair?

 

Because there is no central exchange or reporting requirements, a guy on a banks FX desk can phone a pal on another desk and just do a deal for 10 yards. (A yard is slang for a billion units).

 

As there is no volume information reported by either party quote providers take changes in bid/ask as a tick (unlike other markets where a tick is an actual transaction) but obviously this is only from the networks that they are actually connected to.

 

So to be clear in spot FX you can get a tick when no trades have taken place, you can also have a huge trade go off that does not generate a tick.

 

Having said that some people find it an adequate proxy. It is debatable as it could simply be that other factors (price action perhaps) are contributing more to there success more than they realise.

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There's actually some really good information in this thread so it's worth bringing it back up the list.

 

Other than dropping volume (if you choose, I know people who use it with FX still) there is no need for any indicator or changes to how you detect the price action you are wanting to trade (unless you are trying to trade a lot of gaps which you won't find).

 

You will need additional filters around such things as time of day to trade, and an appreciation of the fact FX markets range rather than head for the moon, declare bankruptcy or get bought out in a takeover, all of which can effect your money management strategy.

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Technical analysis works better on FX because FX have more liquidity and in FX only speculators are trading. In equity trading beside speculators you have traders who really want to own part of company. How much would you pay if you want to own for example 10% of company shares?

 

Of course there are many shares on market on which you could apply technical analysis, but in general technical analysis gives better results in trading FX.

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It depends how you view the world. If I put up daily and weekly equities charts, and FX charts of any liquid timeframe, only the gaps between the week/day would give you any idea which was which.

 

Same patterns, same price moves, but each has it's own approach to how we manage the trade.

 

If I tried to compare intraday equities to FX, then no, the considerations of where the "real" market open is (where we as traders can engage it) on any given session means the range of the day probably isn't fully tradable.

 

The fact people would pay more for an equity if they have a certain view of that company is a good thing. Currencies range, Equities can head for the moon (and sometimes back :rofl:)

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