Why Currencies?

[VielGeld]

From reading around on this site, I found it odd to see how many traded currencies. Is there any advantage to this?

I might be biased since all the books I've read are mostly American and the subject is mostly stocks/indexes/ETFs since that's what's traditional and all that.

But anyway, I'm curious. Why currencies?

 

[Lord Flasheart]

From reading around on this site, I found it odd to see how many traded currencies. Is there any advantage to this?

I might be biased since all the books I've read are mostly American and the subject is mostly stocks/indexes/ETFs since that's what's traditional and all that.

But anyway, I'm curious. Why currencies?

For me it was simply because there are more markets to chose from so I could wait for a set up. when I started I just traded FTSE. I then looked at other indices. This was followed by looking at US shares(Id like to see someone make that pay). I think the real reason is that its 24 hrs,so we can lose more,more often This used to be a futures and ftse cash site mainly ,now its mainly forex. Times change

 

[Chartsy]

Can't afford to trade any other market

 

[Rhody Trader]

The others hit on the big points - low financial barriers to entry and round the clock access. You can toss in the availability of leverage as well.

 

[bbmac]

They are mostly liquid,volatile, low spread erosion relative to average daily pip range, trend well, can react well/predictibly to fundie data/news events, are very 'technical' and there is a proliferation of them.

If widgets did the same or better I'd trade them instead/as well.

G/L

 

[pboyles]

From reading around on this site, I found it odd to see how many traded currencies. Is there any advantage to this?

I might be biased since all the books I've read are mostly American and the subject is mostly stocks/indexes/ETFs since that's what's traditional and all that.

But anyway, I'm curious. Why currencies?

Forex trading gets hyped a lot in the UK by the brokers and vendors, mostly for their own benefit of course. Futures is the way to go in my opinion.

 

[JRP2891]

Forex trading gets hyped a lot in the UK by the brokers and vendors, mostly for their own benefit of course. Futures is the way to go in my opinion.

Futures in what though? Surely it all depends on what your strategy is...?

With regard to currencies, i'd rather trade spot over futures any day of the week.

 

[TASK]

Forex trading gets hyped a lot in the UK by the brokers and vendors, mostly for their own benefit of course. Futures is the way to go in my opinion.

I totally argree with you, you get more bang for your buck with futures, not to mention the liquidity is awesome.

 

[pboyles]

Futures in what though? Surely it all depends on what your strategy is...?

With regard to currencies, i'd rather trade spot over futures any day of the week.

Not currency futures, they have crap volume. I was referring to the big contracts like the e mini S&P, the Bund and the Eurostoxx.

 

[JRP2891]

Not currency futures, they have crap volume. I was referring to the big contracts like the e mini S&P, the Bund and the Eurostoxx.

Yeah, if you play levels, futures is the only place to be imo.

 

[Lord Flasheart]

Not currency futures, they have crap volume. I was referring to the big contracts like the e mini S&P, the Bund and the Eurostoxx.

When you guys say futures,do you mean futures on Forex? The points you make are so valid. We all think the spreads are low on forex and we can trade reasonably cheaply,or so we think. in reality its not cheap to trade and you 1 pip spread on eur/usd is a huge commission for the broker via the introducing broker and whoever else is in the chain.
IG have about 80% of retail business we are told and they have a 2.5 spread on euro.I think I will introduce you guys to my broker, in fact it would be a bad idea if we came together on trade2win and negotiated our own deal.

 

[Lord Flasheart]

sorry,i was behind on the thread.

 

[Rhody Trader]

We all think the spreads are low on forex and we can trade reasonably cheaply,or so we think. in reality its not cheap to trade and you 1 pip spread on eur/usd is a huge commission for the broker via the introducing broker and whoever else is in the chain.

Spreads are, of course, a factor in all markets. A while back I did a study on them across an array of different instruments to see how they compared (see The Cost of Trading). When factoring in commissions, forex compares very favorably. Even without the commissions included it's not bad either.

 

[pboyles]

Spreads are, of course, a factor in all markets. A while back I did a study on them across an array of different instruments to see how they compared (see The Cost of Trading). When factoring in commissions, forex compares very favorably. Even without the commissions included it's not bad either.

Forex doesn't compare favourably to something like the e mini S&P, one tick on this contract is $12.50 and commissions are generally around $4 even for the smaller accounts. Therefore your total costs are less than 1/3 of one tick. Something like the Eurostoxx is even better, 10 euro a tick and around 2 euros commission so about 1/5 of a tick in costs. Of course these figures are for small accounts, those numbers go right down when you are trading larger size.

 

[VielGeld]

I see, thanks for the replies, guys. These are indeed good reasons to trade forex.

I myself have been angling for better commissions as I'm paying $15 per options trade, which is hella expensive as it turns out.

 

[Rhody Trader]

Forex doesn't compare favourably to something like the e mini S&P, one tick on this contract is $12.50 and commissions are generally around $4 even for the smaller accounts. Therefore your total costs are less than 1/3 of one tick.

You're not equalizing for contract sizes as I did in the study I linked to above.

Speaking to the mini S&P example, that contract is currently worth about $62,500. The spread of $12.50 plus the $4 commission adds to $16.50.

Now, let's look at an equal-sized EUR/USD position. A pip at that size is worth $6.25, so even if we assume a 2 pip spread (and we can certainly get better) the cost is the exact same as with the futures. Most folks don't pay commission on forex trades, so the same size position cost $4 less to trade.

 

[pboyles]

You're not equalizing for contract sizes as I did in the study I linked to above.

Speaking to the mini S&P example, that contract is currently worth about $62,500. The spread of $12.50 plus the $4 commission adds to $16.50.

Now, let's look at an equal-sized EUR/USD position. A pip at that size is worth $6.25, so even if we assume a 2 pip spread (and we can certainly get better) the cost is the exact same as with the futures. Most folks don't pay commission on forex trades, so the same size position cost $4 less to trade.

In the example you give you'd have to trade 2 FX lots to get to the same tick/pip value, wouldnt that be 2 x 2 pips = $25 at the rates you used?

 

[wackypete2]

You're not equalizing for contract sizes as I did in the study I linked to above.

Speaking to the mini S&P example, that contract is currently worth about $62,500. The spread of $12.50 plus the $4 commission adds to $16.50.

Now, let's look at an equal-sized EUR/USD position. A pip at that size is worth $6.25, so even if we assume a 2 pip spread (and we can certainly get better) the cost is the exact same as with the futures. Most folks don't pay commission on forex trades, so the same size position cost $4 less to trade.

You beat me to it

Peter

 

[pboyles]

Of course we're also forgetting about slippage on forex plus all the funny business from dodgy brokers.

 

[wackypete2]

In the example you give you'd have to trade 2 FX lots to get to the same tick/pip value, wouldnt that be 2 x 2 pips = $25 at the rates you used?

You can't go by pip/tick value because the range of movement is very different between forex and emini. You have to use the contract value to compare.

Peter