With stock trading, typically, trend-following strategies are used to capitalize on rising RS, institutional accumulation, and strong fundamental drivers, through price pattern breakouts. This applies even intraday. But with Forex, I'm just wondering where the edge comes from for a technical trader, especially a purely technical trader. I get that price patterns occur in FX too, but the price patterns don't cause bullish action (maybe on a lower time frame), wouldn't the edge have to come in a similar way to stocks, strong macro drivers, and using price patterns for entries? It'd also be kind of hard to determine RS for a currency pair no? What to compare it against?
It is difficult to generalize it. Forex and stocks are different. It looks like you are more familiar with stocks. So better stick to stocks then because you need a few years to understand a totally different asset class like Forex and better have a good strategy on stocks until you can make consistent money here. If you are not profitable nowhere you need to consider different characteristics before you choose a market to trade. I would say Forex is a more difficult market to trade than stocks. But that is me. Higher volumes come with more efficiency thus it is more difficult to find any edge and trade profitably. So better until you get bored from making the same money in stocks every day or month you can then look at other markets like Futures or Forex and start to trading those. Maybe the most smooth transition from stocks would equity index futures trading. Before you move on to Forex (if). These links also might help you to get a better idea what you asked: https://www.dailyfx.com/education/beginner/forex-vs-stocks.html https://www.livingfromtrading.com/blog/trading-forex-vs-stocks-vs-indices/
I'm attracted to both markets (FX and stocks). I do know a lot more about stocks but currently weighing all criteria before specifying on one particular market till I get good at it. For FX, I'm looking to day trade, but stocks more on the swing side. I get that because there is a lot more volume and liquidity in FX a lot of the pricing is more random and noisy, but I still think edges are there just don't know why and how their classified. Preciate the links
I posted the image below (an example of a four-hour chart) in another thread earlier today, but it also illustrates why it seems to me that if a (technical) trader simply buys when an asset is rising and sells when it's falling, that's all the edge they need. More specifically, buy when the green moving average is sloping upward, possibly using the purple moving average, the bands of the Donchian channel, and especially reversals in the black moving average, to pick levels at which to enter positions, as well as when to take profit; and do the exact opposite when the green moving average is headed south.
VWAP is huge in the FX market -- maybe even better than stocks since stocks are so influenced by spread/beta/vol/rates markets. If I was gonna trade FX using technicals, I would use futures VWAP based on CME products, and the rates market (rate differentials, etc.) I use a regression type of AI model with VWAP, and it can be better for FX than stocks. [EXAMPLE] For stocks and indexes, the equity volatility models are nice.
I don’t trade stocks but I do FX all day long so briefly… standard TA works in context (to a point). Pay attention to session times. Macro data takes time to fully show its hand (see boe interest rates recently). TWAP is v important, so measure time of moves carefully. Opening ranges are important too. RS usually holds for the day post Asia, but be aware of market moving data coming up up to t+2. Pre moves are just as big as ‘real moves’. So many similarities I’m sure… just a lot of specifics. It gets a bad rap due to low barrier of entry and absolute knuckleheads trading it, but don’t let that put you off
Nice free pdf to read from a 20 years experienced (Chief) Forex trader at an Investment bank. https://traders4traders.com/wp-content/uploads/2018/02/FX-Insider.pdf "Bradley Gilbert Ex-Citibank Chief Foreign Exchange Trader FX INSIDER With more than 20 years’ experience as a Marketmaker"
Any good US FX brokers out there? I want to try some pilot trades with real $$$, but damn the spreads for US brokers are quite high for major pairs, and most of the brokers are non-ECN.
@TrAndy2022 -- Thanks for this sup -perv book which I would never have found. Great Contribution to ET.