Thinking of Switching over to Currencies

[safvan]

I trade stocks. Do okay but it sort of limits the abilities. Currencies are hot now days. I was wondering what the possible advantages are of currencies. I am aware of low margin requirements but why have many traders moved to currency trading instead of traditional stock trading?

Thank you.

 

[Martinghoul]

'Cause they're silly and lazy?

 

[Black Swan]

I trade stocks. Do okay but it sort of limits the abilities. Currencies are hot now days. I was wondering what the possible advantages are of currencies. I am aware of low margin requirements but why have many traders moved to currency trading instead of traditional stock trading?

Thank you.

cfds are the hottest thing atm aren't they? In terms of growth across Europe as an 'investment class'?

 

[Vorbis]

Just guessing, but I would say tighter spreads, greater liquidity and 24 Hr markets are all possible factors.

 

[0007]

I trade stocks because in the main (well, my ones anyway) because they're slow, steady, boring, predictable and decently profitable. Never found that to be the case with fx but presumably many do.

 

[new_trader]

I trade stocks because in the main (well, my ones anyway) because they're slow, steady, boring, predictable and decently profitable. Never found that to be the case with fx but presumably many do.

If you trade international stocks you get the currency benefit as well.

 

[Black Swan]

I trade stocks because in the main (well, my ones anyway) because they're slow, steady, boring, predictable and decently profitable. Never found that to be the case with fx but presumably many do.

Could you not transport that view over to FX if you were a position trader? Even for not too sophisticated investors as an investment class it makes just as much sense to buy currencies as buying equities non?

 

[safvan]

cfds are the hottest thing atm aren't they? In terms of growth across Europe as an 'investment class'?

The problem with them is that most CFDs are available for stocks that are dead beat or large caps. There isnt much expectation of immense stock price increase in these. It is good for short term swing traders.

I have looked into CFDs but those massive $20 dollar moves in a 6 month period is usually not available.

It is for hot companies like apple etc though where CFDs are available.

 

[safvan]

Also CFDs are based on fake liquidity as they are synthetic. There is no paid up capital or other legal mumbo jumbo.

You could create a CFD to trade *trolls on forums* if the broker is willing to create the market for it.

They are really risky because I do not believe any broker out there has the financial capacity to be a complete market maker for so many companies out there by just following their prices.

If you were to accumulate a $10 Million dollar position for a CFD stock that is trading say at $20. One year down the line it is trading at $80.

How is your broker going to generate $30 Million dollars to pay you on top of your initial investment? In this case a CFD broker needs to continuously make sure to keep enough money in their account to pay for the profitable trades. For small profits they can probably afford it but what about large ones?

I believe strongly trending stocks like apple etc are seriously hurting CFD brokers because trading them is easy for simple buy and hold.

Very fishy market. No wonder it is banned in the US.

 

[new_trader]

It might be true for OTC CFD's but the ASX offers exchange traded CFD's so it is a fully transparent market.

http://www.asx.com.au/products/asx-listed-cfds.htm

 

[safvan]

It might be true for OTC CFD's but the ASX offers exchange traded CFD's so it is a fully transparent market.

http://www.asx.com.au/products/asx-listed-cfds.htm

Unfortunately these are just dirty old tricks to legitimize or at least make it look that way.
Unless the company for which the CFD is traded for starts offering it as a product, it does not make sense and CFD would not be needed for this. Someone has to pay the price of for someone winning big.

I will give you a simple example of this. Lets take apple AAPL. Daily dollar volume of this instrument is $4.6 Billion. That is hundreds or thousands of people exchanging $4.6 Billion worth of money around with actual transfer of company ownership. This exchange FORMS the price of this instrument.


The same CFD being traded say by FXCM or IG markets CANNOT have $4.6 Billion dollar worth of money floating around for just supporting the PRICE of this instrument. There might only be 50 people buying or selling this CFD every day. How can a broker or even for that matter an exchange guarantee my investment say if I buy $10 Million dollars worth of APPLE at $150 to sell at $350. How is the exchange or the CFd broker going to generate $13 Million dollars assuming I am betting just $1 dollar per pip on it?

The truth is that CFD markets just like credit default swaps etc are nothing more than a modern form of betting shops or bucket shops.

You can only win small amounts on IRREGULAR basis. As soon as you win big, you are thrown out.

I would stay away from synthetic markets. For many that do not know these CFD brokers have to actually apply for an online GAMBLING license to allow these products. CFDs are an online gambling product.

 

[alan5616]

I trade stocks. Do okay but it sort of limits the abilities. Currencies are hot now days. I was wondering what the possible advantages are of currencies. I am aware of low margin requirements but why have many traders moved to currency trading instead of traditional stock trading?

Thank you.

As a fellow member has previously commented, the appeal of Forex is 24 hour trading. Also, there is no problem with liquidity.

One of the disadvantages is that you own nothing. Most FX traders, including myself, trade with a highly leveraged account. All we do is take a view and hope that we get it right. I've been looking for an effective crystal ball, on eBay, but, so far, the ones I've had on a 30 day free trial have been a waste of time

 

[buckscollector]

Being an ex stock and options trader I got attracted to Forex for these reasons

24-Hour Trading
Minimal or no Commission in most cases
Instant Execution of Market Orders
Less chance of Market Manipulation
Leverage as mentioned above
Thats all I can think of at the moment.

Just trade whatever floats your boat.

bucks

 

[JRP2891]

I trade stocks. Do okay but it sort of limits the abilities. Currencies are hot now days. I was wondering what the possible advantages are of currencies. I am aware of low margin requirements but why have many traders moved to currency trading instead of traditional stock trading?

Thank you.

Yeah free money over here!

 

[safvan]

I dont know but people say there is no shortage of liquidity in forex but I believe thats bs. You need to trade substantial amounts to make a decent profit. There would always be an issue when 10 traders put in a order of $5 billion each and 1000 put in a order of $10k each.

Market manipulation exists when you grow big. In the end you have to deal with dealers of the bank who have to take the opposite side of the trade to supply you the Euros or Dollars if the amount is big.

There is a reason its easy to convert $10k into $100k but not $100k into $100 Million doing short term trades in forex. Anyone who says hes done it is lying. Big money just cannot be made in short term forex trades. To make a $1 Million dollars you need to take a position size of hundreds of millions if not billions and when you require that much liquidity for short time frame, you cannot get it.

Two or three big trades from billion dollar traders and your long position can easily turn into an opportunity for the shorts.

The liquidity is available because the size of the trades has to be substantial to really make any impact on your profits.

Hmm...I guess I will stick with stocks. They are slow but good enough. Thanks for the feed back anyways.

 

[0007]

Could you not transport that view over to FX if you were a position trader? Even for not too sophisticated investors as an investment class it makes just as much sense to buy currencies as buying equities non?

Tried it (possibly not hard enough?) but found it doesn't really suit my system or psyche. Probably about 10% stocks come up on my scan and then those have to be seriously weeded. Although there are loads of fx pairs, some seem to be more exotic (ie wider spreads) which makes it more awkward to trade. Couple that with 24hr pricing and susceptibility to slightest political/economic news and my brain starts to complain.

Using currencies as a hedge etc - probably ok for the sophisticated investor but I like the easy life and stocks seem to give me that (and enough dosh for my needs - why bother with more?). Perhaps if I were younger and had led a sheltered life I'd like the thrills & spills of fx but there again, years ago I used to stay up all night and get back late ........

 

[wackypete2]

I dont know but people say there is no shortage of liquidity in forex but I believe thats bs. You need to trade substantial amounts to make a decent profit. There would always be an issue when 10 traders put in a order of $5 billion each and 1000 put in a order of $10k each.

Market manipulation exists when you grow big. In the end you have to deal with dealers of the bank who have to take the opposite side of the trade to supply you the Euros or Dollars if the amount is big.

There is a reason its easy to convert $10k into $100k but not $100k into $100 Million doing short term trades in forex. Anyone who says hes done it is lying. Big money just cannot be made in short term forex trades. To make a $1 Million dollars you need to take a position size of hundreds of millions if not billions and when you require that much liquidity for short time frame, you cannot get it.

Two or three big trades from billion dollar traders and your long position can easily turn into an opportunity for the shorts.

The liquidity is available because the size of the trades has to be substantial to really make any impact on your profits.

Hmm...I guess I will stick with stocks. They are slow but good enough. Thanks for the feed back anyways.

How is any of what you said different from trading stocks? The market makers and otc dealers will manipulate stocks even more so than in forex.

Why are you going on about about $million(s) orders unless you are trading that size? If you try to take similar size short term orders on stocks you will get slipped into hell.

I've traded both stocks and forex for years. I have experienced FAR less slippage in forex than in stocks. Which is a better market to trade is a personal choice, neither is easy.

Peter

 

[1only]

I don't suggest anyone to trade Forex because it's the toughest in trading. You need a lot of time and money to invest and you may never profit from trading currencies. If you do well in stock, keep doing it. If you are disciplined enough, you should stay with stocks.

In my late Forex trading career, I always try everything to stop my friends to trade Forex. I hope you get my point.

 

[new_trader]

I don't suggest anyone to trade Forex because it's the toughest in trading.

Wouldn't you say it's the amount of leverage that makes it seem harder? I've seen the same argument used for Stocks Vs Indices. It's ridiculous.

 

[safvan]

How is any of what you said different from trading stocks? The market makers and otc dealers will manipulate stocks even more so than in forex.

Correct they do. For short term traders that is definitely not advised. For my trading style where I keep the stocks for months to years it takes time to build a position itself.

Why are you going on about about $million(s) orders unless you are trading that size? If you try to take similar size short term orders on stocks you will get slipped into hell.

Correct I think I am too soon to go to that judgement however with all the crap on the internet about forex brokers manipulation schemes it gives rise to many suspicions.

I've traded both stocks and forex for years. I have experienced FAR less slippage in forex than in stocks. Which is a better market to trade is a personal choice, neither is easy.

I have traded hourly charts of forex on demos so far to test it out. Momentum trading and investing techniques work a lot better with forex simply because of its movement. I am just a bit hesitant due to its extreme volatility but that also probably relates to the techniques involved rather than blaming the sports itself.

I will test out demo sometime more before shelling out real $$$.

Gratitude for inputs.