Page 177 – XTrade

Day Trading Forex VS Stocks – The Facts

Day trading forex VS stocks is a tired old debate, where neither side has won the argument. It’s simply about two different types of markets, and nothing more.

Day Trading Forex VS Stocks – the Differences

Day trading forex vs stocks has been debated by many traders. Forex traders prefer forex because of the wider range of markets available. Stock traders prefer stocks because they have stock-specific information and data available. Nonetheless, when the stock market moves in a given direction, so do 70% of all stocks. Having a good understanding of a particular company listed in the stock market can indeed offer accurate trading of its stock. Some stocks can move far more on a typical day, than currencies do. And if the stock is a penny stock, then much larger opportunities are possible. Day trading forex on the other hand is quite different. Because on most profitable days, traders make medium size gains, but these days occur very often. Stock day traders may watch a stock for days and days, and only finally have the chance for a massively profitable trade which will occur just once. Day trading forex vs stocks is a good debate for all new traders. As they have to consider these facts one by one. And make a decision, depending on their analytical skills, which market is better to trade. So ultimately there is no fair comparison between the two. Because it is like comparing apples and oranges; it’s that simple!

Day Trading Forex VS Stocks – A Beginner’s Best Choice

Day trading forex vs stocks is a tough decision for beginners. But since beginners lack analytical skills they are better off trading as follows: They can choose to day trade forex, in any way they want. And there is room for success, in many methods. If they choose day trade stocks, they have to refrain from using news stories in the media. These stories are related to the stocks in question but they never lead actual stock price. Only news from premium information sources is useful for day trading stocks, and still it is difficult to do. Nonetheless, news trading tends to work better on stocks, than on currencies. Any beginner who knows what is CFD trading can actually choose a good CFD forex broker, or one which offers CFDs on both forex and high volume stocks. Beginners can test day trading both forex and high volume stocks, and see how each market works in reality. You will see that both can be extremely risky. But both can also be managed and profitably traded. If you are considering day trading through a scalping strategy, then you definitely have to choose forex over stocks. The higher liquidity of the forex market, during inactive hours, ensures market price will provide good scalping opportunities. Stocks are not good for scalping, because even a single institutional trader can actually make the market move, when they trade. Even during the usually inactive lunchtime hours in the New York session, a stock can spike excessively up or down, thereby ruining a scalping trade.

Forex Trading Online from Home

Forex trading online from home is quite a challenge, but also an intense experience. But it doesn’t have to be intense trading of any particular, popular style.

New Concepts in Forex Trading Online from Home

Forex trading online from home has been synonymous with day trading, news following and high volatility. But that’s not the only way to go. Investing in a foreign currency, on any time frame, is about leading fundamental analysis. It could be on the hourly chart, or on the weekly chart. Traders have to spend hours and hours to navigate through so much information. And to eventually reach safe conclusions, away from the day to day volatility and market noise. Online CFD trading helps facilitate such trading in the best way possible. Traders can make small trades within the daily session, but they have to be guided by their leading fundamental analysis. All other more popular concepts, such as news trading, will cause excessive confusion. Profitable forex trading online from home cannot be achieved just by following the obvious path. It simply doesn’t work. Only leading fundamental analysis can beat the markets. And this by itself is a big, tough subject. But that’s what it takes to make money while working from home as a trader. You as a home based trader are at an advantage, over traders working in noisy trading offices. Because this noise and the actions of other traders doesn’t help you with fundamental analysis. These fundamental factors are always interpreted in all kinds of ways, by different analysts. And some of these factors can have a double impact on the market. So as to be both bearish and bullish, but during different time frames. So you will have to even refrain from the desire to label an economic report as either bullish or bearish, because it may be both. The truth is that the market is not always right, and it just deviates from fundamental analysis for few days at a time. But sooner or later it catches up with its fundamental destiny. A quiet home office environment will help you achieve the level of clarity required, to learn and master leading fundamental analysis.

Trading Online from Home and What to Watch out for

Trading online from home is all about creative thinking and freedom of choice. A good mindset, some original thinking, and the efficiency of CFDs can get you on the road to success. You don’t need to learn forex trading through the popular methods. Because to a large extend, the material taught in those methods is lagging the market. Some parts of this material are good and still very useful. But concepts such as support and resistance for example, are so oversimplified and presented in the wrong way. When you think about it, support and resistance theory, based on simple trendline analysis on the charts, is misleading. Because it appears as though the theory is always right, no matter what the market price does. If market price rises too much above a resistance level, it seems right because it makes sense according to the theory. But if it drops instead, by the same amount, again the theory appears to make sense. Just be careful on this one, because unlike what many believe about market price, it is not always right! Price can deviate from fundamental levels, for days at a time. And support and resistance levels all seem to be working perfectly during these deviation periods. But who will warn you of the coming surprise reversal? Where price will suddenly converge to fundamental levels, or even pierce through them and deviate to the other side. Only leading fundamental analysis can warn you of this.

Trading Online Brokers with Best Dealing Price

All trading online brokers appear more or less to be the same. But when one trades large volumes, or at volatile times, some brokers are better, way better, than others.

Trading Online Brokers and CFD Liquidity Pool

Trading online brokers offer so much today, that it would have been seen as an unfair advantage a decade ago. CFD trading online brokers in particular have improved liquidity so much, that trading efficiency defies belief. The liquidity available in most CFD platforms makes this possible through fast and efficient trade execution. So that a trader always finds a counter-party. The actual technology used is very robust. And in fact, as far as stock trading goes, CFD trading liquidity is better than the underlying stock market. Not only can CFD traders short stocks even when short selling restrictions are imposed at the NYSE, but also it is much less exposed to computer glitches — such as that of 2010, where there was a “flash” crash and the Dow plummeted by some 1000 points in a day. Had you been a CFD stock trader on that day, you would be at normal market risk, while still being able to trade in both directions. And at ultra low dealing costs as always. The forex market is also another area where liquidity pools are important, especially in fast trading of volatile markets. Despite the huge natural liquidity of the forex market, spot brokers still suffer from slippage and re-quotes. CFD forex brokers perform much better on that one too. The only limitation is this superior trading is limited to $100 per pip. Above that level things become to behave like in the spot forex market. But while under $100 per pip, you are at a serious advantage over large spot forex traders. Older traders appreciate CFD liquidity pools exceptionally well. Because they have been through the pre-CFD era, and the dark ages of trading. Moreover, some new forex strategies, not well known yet, are actually made possible through CFDs.

Trading Online Brokers for Advanced Hedgers

Trading online brokers offering CFD contracts are suitable for advanced hedging strategies. The trader in these strategies is able to implement frequent hedging trades at very low cost, and perfect linearity. This kind of trading is becoming popular among traders experimenting with new hybrid strategies. Combining different markets and time frames. Even forex news trading and unorthodox forex signals can be part of such strategies. The only rules required are about hedging risk, either dollar for dollar or asymmetrically. Each approach has different advantages. These CFD brokers provide the liquidity required in each trade. But hedgers care most about linearity. An overlooked factor which is critically important. Even Futures trades who make long term Futures trades (which do not follow markets linearly and fast enough), do all their short term hedging through the highly linear CFD contracts. The net result is significantly smaller losses when things go wrong. And sense of security, since it is okay to be partially wrong, or even very wrong on the timing.

The Benefits of Trading Online Practice

The benefits trading online practice offers are priceless. As traders learn to handle risky and stressful situations in the markets. Practice does make perfect.

Trading Online Practice through Small Live Account

A small size live account can facilitate all tasks for trading online practice, including the psychological aspect, for those fearing to trade with real money (full trade size, right away). Losses are experienced and are received in all kinds of ways. And winnings are always welcome at first. As traders overcome their fears, they tend to look more into losing trades and learn more from them. Whereas winning trades are viewed as an ego boosting trap, and are seen as dangerous. But every trade really matters. And while statistic is good, wise traders tend to go beyond statistics and into the uniqueness of each trade. Treating each trade as a long term investment so to speak. That’s how practice becomes really beneficial and improves your trading. Demo account trading is also used. Especially in more complicated strategies where many variables have to be taken into account. Demo account trading is also ideal for testing out money management systems and how to adjust your trade size as your account size changes. A demo account at $20,000 can be used to fully and properly test money management systems. Many mistakes and pointless risks can be identified through trading online practice. Online trading becomes more realistic through practice, as traders gain confidence. And no mater how much critics disparage small size live account and demo account trading, confidence is really far more important than knowledge. As many people can be good learners, but only few dare to take action and make use of this knowledge. Forex trading is particularly good for practicing purposes, in all aspects. As any task which requires trading or investing in foreign currency either directly, or through CFDs, is a task of thought. All transactions are viewed as if they were long term investments. And every one of them is unique. Given the wide range of choice in the forex market, one never runs out of ideas, on any day or week.

Trading Online Practice Does More with Less

Trading online practice is criticized by large size traders, who simply failed to be successful in their own large size live trading. Or it simply took them too long to become successful. So it is natural for them to deny the possibility, that demo or small size live trading practice, produces profitable traders. They cannot accept their own failures and admit that others are better. It is common for these proud deniers to make a big deal out of their own trading. As if the markets somehow depend on their trading… Wise traders on the other hand are humble, and don’t make a big deal out of anything. And they are certainly open to the fact that someone else out there is better than them. The world of currency trading has proven time and again, that even the largest bankers and top firm traders can be completely wrong. Trading size doesn’t make one more clever than others. Necessity to win does. Practicing traders have the necessity to do more with less. They have nobody to bail them out if they fail. And on the positive side, they have nobody imposing rules as to how they should trade.

Trading Online Software Development

Creating Personal Trading Online Software

Some traders are also coders, or may simply possess the analytical skills needed to code. These people can develop their own trading online software for any market.

Developing a Trading Online Software

Developing a trading online software is about trading skills and analytical skills. If you know how to code, you can do it yourself. Else, you will have to produce the well defined algorithm and give it to a programmer to make the final software. Programmers themselves are not experts in many fields, and probably not in the markets. But if you work closely with them, the final software may be developed perfectly. The software itself is usually used as a trade-aiding tool, one which produces signals or confirms your own signals. Trading online is a manual process, but automation can deal with a variety of routine tasks, such as: indicator line crossovers, moving averages, and even leading-lagging analysis. For a good trading online software to be developed you will have to go beyond what you learned in some forex trading course and into numerical analysis, spreadsheets and manual simulation through a spreadsheet. Because great insights can be gained this way. Currency pairs can be measured through various metrics, such as volatility and LSS pivots. Your software can produce the final numbers in no time. But the rest of trading work has to be manual. And even more manual if fundamental analysis is used, which cannot be simulated at all. All your software will do is provide a period of time, or warning signal where an actual trade signal is likely to appear and the market will move. If your manual trading produces a signal and there’s no corresponding warning signal from your software, it calls for caution and more checks. Automation can remove the routine part in your analysis, and save you a great deal of time. Because total lack of automation can also lead to wrong assumptions and mistakes. Accurate measurement of metric parameters is important, and that’s what automation provides.

Trading Online Software Myths

There are trading online software myths on Expert Advisor software products. These myths are to the effect that profitable trading can be automated 100% and human emotions are removed etc. Yes, human emotions can be bad and cause large losing trades. But they are also good because that’s how the best trades are made. Things like deceptive trading action, false breakouts and more, are almost impossible for any software to deal with. Software is used by top trading firms, but only on routine tasks. Software cannot be used at the forefront of trading. Just like it cannot be used to fly jet fighters into dogfights. All it does is provide the pilot with advance warnings, and in some aircraft it may fly the plane lower, if it senses that the pilot may have passed out. But there’s no way for software to engage the enemy all on its own. It’s the same with trading. Hence the marketing on Expert Advisors is very misleading. And that’s why the forex market, which is mostly manually traded, deceives and beats all Expert Advisors. Because software cannot sense and avoid the natural traps of the foreign exchange currency markets.

Trading Online Best Performance

Trading online best performing traders are amazing. People tend to believe that no such traders possibly exist, until they get to see one in real market action.

Trading Online Best Performing Directional Traders and Hedgers

Trading online best performing directional traders and hedgers carry out different tasks. Traders take a strictly directional view on the market, and if wrong, they get out. They have set conditions for entering a trade. And when these conditions are no longer valid, the trade is seen as a loser, right away, and it is closed. Hedgers on the other hand have a more flexible trading plan. They may see a bad trade, as either a developing big loser, or as a short lived loser. Especially in trading forex, hedgers are looking to predict how far the losing trade will go, and whether it makes sense to hedge it. When they have no time to think, and markets look confusing, all losing trades are hedged immediately. Thereby giving them much more pressure-free time, to make a decision. Both directional and hedging trading concepts are useful. Though traders tend to eventually settle down with one strategy. The bottom line is that may losing trades can be avoided in both directional trading (through fast condition validation). And in hedging kind of trading, through taking a trade in the opposite direction. Both of these trading philosophies deal with market uncertainty, and prepare the trader for failure. For failure where there may be disappointment as the original, imaginary trade didn’t work out as planed. But this failure stops at emotional losses, and actual fund loss is limited to a minimum or even totally eliminated. All those trading online best performing directional traders and hedgers know that it is more important not to lose, than to win. They accept to be wrong on their opinion, avoid losses, then plan another trade. Hedging trade ideas can be nicely implemented through a CFD trading account. Where traders can afford to have soft, flexible opinions on the markets. The opposite of this, which is to always maintain a rigid opinion approach doesn’t work in practice. It can only work if the account is very large, and the trader is willing and patient enough to hold onto losing trades for days and days. And only very good opinions based on fundamentals can win over adverse market prices.

Trading Online Best Results

Trading online best possible results by traders whose income depends on trading, are truly astonishing. Though few actually show trading statements, actual trading action seen is amazing. Some medium size commodity traders have seen making $10,000 per week. Week after week after week, without incurring big loses. Surely they do use commodities and the best forex trading platform, so as to trade a commodity they understand well. But also hedge against it through a currency pair. Generally, they tend to have long term, one sided opinions on commodities, and more bi-directional, volatile opinions on currency pairs. The US dollar for example may rally on geopolitical events, or a currency pair may decline for a week, on central bank intervention. But a related commodity will not have any of these counter-trend price moves.