There are many professional day traders out there who focus all their efforts on trading a particular instrument, whether it’s a currency pair or a stock market index. I personally have attempted to trade both in the past so I can speak from experience when I say that in general it is much easier to trade forex.
The main reason why is because when you trade one of the major currency pairs you can usually concentrate purely on technical analysis. In other words when you trade the intraday charts you can trade the forex pairs around pivot points and areas of support and resistance because the price movements can be quite predictable. However when you trade stock indices such as the FTSE 100 or the Dow Jones, for instance, the price movements are not always so predictable.
That’s obviously because these indices are made up of various different stocks and they don’t always rise and fall in tandem with each other. Yes you may get some days when all the constituents trade higher or lower, but most of the time certain sectors will be strong, whilst others may be flat or trading lower. Plus there are often occasions when individual stocks release some news concerning their company and as a result the share price moves independently of the wider market.
As a result of all this, you don’t always get as many predictable bounces off key support and resistance levels, for example, as you do when you trade the major forex pairs. Therefore they are much harder to trade with any confidence because you can never be sure of how the price will react around these key levels.
Another point worth making is that when you trade forex you can pretty much guarantee that you will have a large trading range for many of the most popular currency pairs, such as the GBP/USD, EUR/USD and GBP/JPY pairs, for any given trading day. The same cannot be said for the various stock market indices, however, because there are some days when the FTSE 100, and even the Dow Jones, will trade within a very narrow trading range.
So the point I want to get across is that on the whole it’s a lot easier to day trade the forex markets than the stock market indices. They respond very well to technical analysis, whether it’s fibonacci levels, pivot points, or simply trend lines and basic levels of support and resistance, whereas the same cannot always be said about the indices because of how they are derived.
Many people want to enter Foreign Exchange market as that involves lot of money to be exchanged. There are many kinds of major trading centers that are existing in developed countries from UK, Japan, and US etc. when you trade in Forex trading, and then there is no set venue for same. This kind of Forex trading can be done 24 hours in a day, and that can be done every day from Monday to Sunday.
There are some major Forex trading centres and one main reason is that these countries do not have any pegged or fixed currency rates. Here comes the role of central bank that is responsible for maintaining good reserves for foreign exchange. All this is done to stabilize economy of any country. Any of these local exchanges are done in order to make sure that adequate flow of reserves is made with same. Inflation rates could be lowered down with the help of stable foreign investment. With fixed currency rates, inflation rates could be easily lowered down and demand for foreign products could be stimulated more and more. For longer period of time, this kind of things must be very difficult to maintain.
One of the major things while you get in to Forex trading involves getting hold of right broker. Before you take in to plunge of getting in Forex trading, you need to find a Forex broker who could enter forex trading every day. This trick would help you in finding the trickiest of the trade holder. You must read all the reviews and go through all of the terms and conditions attached with the same broker. Many of these choice depends on your trading preference and available investment capitals.
You need to master the basic things in Forex trading before you jump in to it. You must read up all articles and join forums in order to gain more information. You can also make many online as well as offline friends who could help you with same. You need to keep your eyes and ears open. Correct Information is very necessary in this time. You must stay in touch with the floating market as it will help you generate income in healthy way. You must analyze the trading news and your judgments should be dependent on many factors not just the news you are getting. When you enter in to Forex trading market, you need to plan with only one marketing strategy that you should follow. You must make a clear and concise plan. Price action strategy is one of the proven strategies that you need to follow if you need more profit flowing in your account. There is no single strategy that will promise you to give you complete success but at least some percentage of success could be gained with following any of these strategies.
Successful forex trading requires that you keep a close eye on the various business aspects. It may be overwhelming to keep in mind all these activities and transactions. For this reason, it is essential to have a system of analyzing and evaluating your various actions. The trading log is an important tool in forex trading. It assists you in recording and keeping track of all your important tasks and transactions. It is a very effective and efficient system that will save you the time and energy that goes into all the trading chores when business is booming.
A forex trading log can be a simple tabular grids with entries such as the date, the price, number of lots opened, exit price, initial protective stop level, commodity, quantity and so on. Although most traders have been using personal diaries as the trading log, there are standard logs which have been designed specifically for forex trading. Some logs are in book form while others are digital. Both of them may have the same formats but vary with convenience and flexibility.
With the digitalization of business, book-keeping and accounting practices, more and more business owners are turning to digital trading logs. Spreadsheet programs can make a very good trading log for your business since they come with a host of computing and data management capabilities. Updating figures in the log can be easily automated allowing you a great deal of flexibility. Some of the commonly used spreadsheet programs which can be used to create a simple trading log include the Microsoft Excel and The Lotus 1-2-3.
Forex trading software available in the market may help you to carry out the various forex related tasks one of which is keeping an up-to-date log book. The software that you purchase is likely to have market forecasting and analysis tools and order as well as management capabilities; which makes it a good package to manage your forex transactions.
A good trading log will optimize your trading business by eliminating weaknesses. The entries and exits that are to be recorded on the log book should be determined before hand. Otherwise, it will be hard to know which trades are doing well and which one’s aren’t doing well. There should be an area where remarks and comments can be made after a fixed trading period. These will help you when making key decisions about what strategies to put in place to ensure that your’s profitable trading business remains so.