Forex Trading

Does anyone have any advice to offer on the pros and cons of Forex trading? I'm seriously considering investing in a Forex trading fund or two.

I used to spreadbet FTSE350 stocks and was also a share trader down to small caps. I am now fully forex SB-er only. I admit to no knowlege of forex trading funds.

Differences between forex and stocks can be simultaneously good or bad depending on your risk tolerance / profit ambitions. Here are some off the top of my head -
* in % terms, forex pairs are much less volatile than stocks
* forex trading is available 24hrs/day weekdays
* as forex trades continuously weekdays, serious opening gaps are uncommon
* much smaller number of individuals who can move a forex pair through a trading statement, ****-up, press release, fraudulent activity, annual report etc.
* trends established in forex pairs can continue for months / years
* liquidity is rarely a consideration in forex
* trade overheads per forex trade are usually much lower than small cap stocks
* you can't own stock market shares in a forex pair or single currency
* there is strong potential for innovations, new technology, scientific discoveries etc. to impact on some stocks
* competitors' initiatives can have instant and dramatic impact on a stock

Etc.

The TA for forex is till just TA.

Just do a research, don't rely on someone else telling you what to do with your money and where to put them.

Forex trading gives the opportunity to make quite a bit of money fairly quickly once you know what you're doing, but it also requires some time to accumulate the necessary knowledge and experience.

Can somebody clarify something about this for me: with Forex, if you have set a certain stop loss, can a sudden price jump take you past your stop loss and result in you losing more than your stop loss would otherwise allow?

Yes MK_Tom its possible but rare compared to say an individual stock. A well known example would be 15/01/15 when the Swiss National Bank announced it was discontinuing the minimum exchange rate of CHF 1.20 per euro. The news was so dramatic for the CHF pairs, see charts for that day, that trades ceased across a wide range of prices containing many stops, giving them no opportunity to trigger.

But these thngs are rare in forex as this market opeartes 24hrs/day Mon-Fri and not many influences can move a pair so dramatically - the dates and times the main ones - bank exchange rate decisions and US Non-farm Payrolls - are known weeks ahead of time.

Thanks for that. Why did the trades cease without the stops triggering? Sorry I'm not entirely clear what you meant there.

What I was getting at more was the price 'gapping' where it leaps from one price to another without passing though the price the stop is set at.

The thing about Forex being 24 hours interests me, because when I use MetaTrader4 on demo mode it doesn't show the price moving (or any chart data) outside of the London exchange opening times. I'm guessing that's just an issue with the demo program.

In all markets, most of us are not trading directly with another trader, buying and selling at prices only the two parties privately agree. Most of us trade via an intermediary, in my case a spreadbetting firm but it could be a broker. The SB firm offer whatever price they wish, but it won't differ much from what everyone else offers. But under special market pressure, they might gap their price to keep pace with their competitors. If the rest of the market gaps down by 0.1000 instead of 0.0001, your intermediary has to follow, or else get killed by arbitrage.

It can also happen that they simply stop offering trades until the market fluctuations have calmed down, as they can't accurately hedge their risk from their customers' new trades during exceptional volatility: better to just shut up shop and wait for the storm to pass. If the new opening price is now below your stop, it won't be triggered retrospectively.

Guaranteed stops are honoured but you have to pay a premium charge up front for such insurance and thats not economical as a regular practice.

Don't know anything about MT4 but I wiouldn;t be surprised if there's reduced functionality on a demo. Which surprise surprise makes them easier to win on.

MK_Tom said:

Can somebody clarify something about this for me: with Forex, if you have set a certain stop loss, can a sudden price jump take you past your stop loss and result in you losing more than your stop loss would otherwise allow?

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I have seen that happening during high volatility after major fundamentals, but otherwise it's a rare occurrence.

mlawson71 said:

I have seen that happening during high volatility after major fundamentals, but otherwise it's a rare occurrence.

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Agreed. Whereas with stocks, its an every morning possibility.

MK_Tom said:

Can somebody clarify something about this for me: with Forex, if you have set a certain stop loss, can a sudden price jump take you past your stop loss and result in you losing more than your stop loss would otherwise allow?

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This happens during high volatility where price never meet the price you set as a stop loss. Nowhere near your SL. That's why it does not register, as it never happened.

arigoldman said:

This happens during high volatility where price never meet the price you set as a stop loss. Nowhere near your SL. That's why it does not register, as it never happened.

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Right yeah, so it's a risk but a very unlikely one?

Thanks to everyone who's helped clarify this.

MK_Tom said:

Right yeah, so it's a risk but a very unlikely one?

Thanks to everyone who's helped clarify this.

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It depends on the magnitude of the event.

Forex is not inherently high risk in a TA/FA sense but the access offered through brokers is generally high leverage. So, if you want to accept the leverage and you can trade, then you can trade forex, but if you can't trade you'll get spanked faster in forex than in stocks - but you would have lost out all the same.

I would go to babypips and do their (free) step by step online course. It's not a scam, it will answer many questions that you'll be asking and a lot more besides, and will give you the basics from which to move on from.

bootsyjam said:

I would go to babypips and do their (free) step by step online course. It's not a scam, it will answer many questions that you'll be asking and a lot more besides, and will give you the basics from which to move on from.

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there are a lot of good forums

Evening all.
Interested in finding out if there is anyway of dabbling in forex without constantly worrying about daily price fluctuations?
If I thought the price of the euro would appreciate long term against the dollar is there any instrument I could purchase instead of worrying about a stop loss getting hit?
Thanks in advance

Joho said:

there are a lot of good forums

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Indeed. I was talking about the specific step by step foundation course that is free, rather than jumping round forum posts by random people. Like you and me.

limerickmick said:

Evening all.
Interested in finding out if there is anyway of dabbling in forex without constantly worrying about daily price fluctuations?
If I thought the price of the euro would appreciate long term against the dollar is there any instrument I could purchase instead of worrying about a stop loss getting hit?
Thanks in advance

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I find EUR/GBP to be much less volatile than EUR/USD. Alternately, you could try a shorter-term trading approach, like scalping, maybe?

Thanks for response mlawson71