Are there more risks with indices?
- Thread starter outhoe
- Start date
relatively lower risk compare with forex.
why?
In general, forex doesn't move much compare with index futures.
ie most of the time, you can hardly achieve reward : risk ratio of > 2:1
Occasionally forex moves massively like what happened to GBP today.
Forex was excellent for trading 1 decade ago
Indices are far less risky than trading individual stocks. But the other side of that coin is they move much less over a given period of time.
Indices are generally not forced into sudden contrary moves they way a share price can be, for example by M&A or fraud rumours/news, or by a competitor company's news, or a change of CEO or FD.
Indices are viable for just the same TA as any other price chart.
Indices are generally not forced into sudden contrary moves they way a share price can be, for example by M&A or fraud rumours/news, or by a competitor company's news, or a change of CEO or FD.
Indices are viable for just the same TA as any other price chart.
Two things make your question unanswerable.
•"Risk" has half-a-dozen meanings, from a vague uncertainty to a monetized sum.
• Even getting to a monetized sum, you need a specific instrument (or family of instruments) and its associated multiplier. And if you're intending on sub-hour holds, you need the tic size, as well.
There is no risk in an index -- the risk is in the trade you are considering.
•"Risk" has half-a-dozen meanings, from a vague uncertainty to a monetized sum.
• Even getting to a monetized sum, you need a specific instrument (or family of instruments) and its associated multiplier. And if you're intending on sub-hour holds, you need the tic size, as well.
There is no risk in an index -- the risk is in the trade you are considering.
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Exactly;
it can be strange when you see a stock go up 100%/500,for example; Turtle Beach goes up $15, to 30,to 45,to 60,to $75................................................ WSJ kept putting that on their data page.
BUT it can go to pennies/penny stock in the past.
Another advantage to indexes/ETFs;
if you lose less you may make more.[IF one loses 50%/takes 100% to break even,+?]I dont do single stocks anymore/but it can be profitable gaps and all
Trading indices and ETFs can be more risky than individual stocks. Say an ETF has an underlying problem, it could be halted and crashes to near zero on resumption. Theoretically, ETFs track some kind of index so moves with it. In reality, the ETF can crash to zero (incur some kind of margin problem over time) while the index only moved by a couple of percentages.
What I'm trying to say is, ETFs are backed by nothing and do crash and burn, while stocks are at least backed by some assets a company holds.
What I'm trying to say is, ETFs are backed by nothing and do crash and burn, while stocks are at least backed by some assets a company holds.
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Also there is risk of nuclear attack;
but not really likely...................................................................................
As far as I understand the quirk with ETFs is: The issuing entity (authorized participant) might decide to go for a coffee break and ETFs could start substantially deviating from NAV. Doesn't happen in liquid ETFs under normal conditions but there have been concerns about ETF pricing during market stress. In such circumstances the only option might be to sit tight w/ limit exit to not get a ridiculous fill. Not something to worry about 99.99% of the time though.
With futures it's just a matter of liquidity in the general market and if there is a party willing to take the opposite of your trade. If you're small fry in a liquid futures contract (front month) then that's likely to not be an issue.
Equity index futures are generally 'safe' but remember leverage and margin...
...low vol is usually a reason FX traders use greater leverage, resulting in blow outs on the occasions when unusual vol actually happens.
Equity indices IMO have all the advantages: Good range most of the time, built in statistic long bias, easy to understand crowd psychology, etc. Of course, everyone will have to find what works for themselves.
With futures it's just a matter of liquidity in the general market and if there is a party willing to take the opposite of your trade. If you're small fry in a liquid futures contract (front month) then that's likely to not be an issue.
Equity index futures are generally 'safe' but remember leverage and margin...
...low vol is usually a reason FX traders use greater leverage, resulting in blow outs on the occasions when unusual vol actually happens.
Equity indices IMO have all the advantages: Good range most of the time, built in statistic long bias, easy to understand crowd psychology, etc. Of course, everyone will have to find what works for themselves.