Biggest differences trading stocks vs forex?

Discussion in 'Forex' started by KCalhoun, Feb 7, 2007.

  1. KCalhoun



    What are the major differences you've all found in trading forex pairs vs day & swing trading stocks?

    In looking at the charts, it seems that forex charts are much narrower, more rangebound, requiring more use of b-bands,stochs,macd,rsi etc, compared to open range gaps/breakouts in NASDAQ/NYSE stock trading.

    What are the most significant differences you've found, from those who've gone from trading stocks to trading currency pairs?


  2. hi, i'm new to the forum but not to trading. i have 9 years under my belt with equities/options, 4 of which have been in FX so i hope you find this useful...

    here are big differences as it relates to FX:
    -24-hr contiguous market
    -immense size
    -generous leverage
    -technical analysis friendly

    the 24-hour run-time of the market is great in terms of keeping price action relatively smooth. there are no overnight gaps per se like that found when a stock closes and reopens the next day at a very different price (usually associated with overnight news). since FX trades basically 24-hours a day it can react to news as it develops and you can get in/out as it happens.

    spot FX (the cash instrument) is the biggest financial market in the world so the liquidity that a market maker could have access to in this market contributes towards how well they can fill your trades.

    leverage is typically 100:1 in FX versus just 2:1 with stocks...if you're comfortable with using leverage then you get more bang for your buck in FX.

    i'm 99% technical driven with my trades. i've found that tech. analysis is much more effective in FX than with stock. in part, i believe it has a lot to do with the fact that there are many things that can cause stock to move whereas with FX there are only really a few macro economic events/news that cause it to less moving parts to worry about when trading FX.

    what you noted about FX being rangebound...actually, statistically stocks tend to be rangebound roughly 70% of the time (based on an old industry study a few years back) whereas FX is more trending particularly with the majors (majors = currency pairs including USD with other G7 nation currencies). you can find pretty good ranging pairs in some of the non-majors.

    if you have any other questions i'm happy to help.
  3. <i>"-24-hr contiguous market"</i>

    That is the #1 pitfall of FX trading. Regardless of where you live, it is inevitable that some of your very best trade entry and/or exit signals will come just before you begin or right after you quit trading.

    Many days, all the action comes between midnight and 6:00am EST with nothing else, zilcho until midnight following. Other days 8:30am thru 1:00pm EST is where the fireworks are. How many hours a day/night can you watch the screens? How high is your endurance level?

    Doesn't matter which major pair, that's the general behavior of a 24hr market. The sole exception to this rule would be long-term swing or trend traders who take signals directly off daily or weekly charts.


    Stock markets have very little overnight movement in relation to the pit-traded hours. With players concentrated inside defined time limits, movement (if any) is confined to a known period of activity.

    Most FX traders find themselves watching screens longer and longer hours over time. The allure of "not missing" the next move is a strong siren song.

    Been there, done that... watched hundreds of others do the same:eek:
  4. KCalhoun


    Hi - thanks for the insights... makes a lot of sense, with the currency markets being open 24 hours.

    With stocks, at least we know "when" to best focus our time, eg usually 9:30am-10:30am and occasionally the closing 3pm-4pm hour...

    Sounds like the currency market is challenging since both macro events can impact breakouts/breakdowns, in addition to open/closing/overlapping times of when the markets have their highest volatility.

    Thanks for the ideas, I appreciate it!

  5. Joab


    It's really very simple.

    If you had only 40 women (currency pairs) to find a perfect wife vs having 4,000 women (stocks) where do you think you would have better success.?
  6. i guess how time intensive FX trading will be will depend on how you approach it.

    i analyze nothing smaller than daily charts to eliminate the need to care about what happens during my "overnight" period. i'm looking for the moves that take days to work out one way or another.

    i think it's a misconception that one has to spend more time at the screen just to trade fx...i literally just check it when i get home from work each evening make decisions, place entry/limit/stops at logical points on a chart per my strategy then call it a night. either they get hit or they don't then i adjust accordingly the next day if need be.

    the great thing about trading is that it can be as time-intensive or not as you just need to develop a strategy that best meets your needs and lifestyle by choosing the typical timeframe that you'd be holding onto trades to fit it.

    as for the metaphor regarding women...which would you rather have...4,000 women most of which are ugly or 40 beautiful women. i'll take being surrounded by 40 beautiful women any day...hahaha. :)
  7. Ha. Guess my simple would be the opposite of your simple. ;)

    I trade primarily to make money, which in turn enables me to live life on my own terms. You generally don't marry for money (as a man).

    Let me put it this way... if you had only a few (forget 40) terrific, desirable women (currency pairs) to figure out what makes each of them tick -- and who you are most compatible / in sync with -- vs. having 4,000 women (stocks), where do you think you would have better success?