Daytrading Equity vs FOREX?

V

VinMan

Can anyone share real life experience with trading equities vs FOREX.

I am beginning to look at FOREX after seeing that my momo based breakout strategy in equities has not been working (is that edge one?). FOREX seems to trend for me (so far---short sample).

To me, it might be that FOREX 1. trends, 2. has lower costs 3. better leverage 4. more trade opportunities.

Currently I trade the NY session and only EUR/USD using the same money mgt principles as I did with stocks (max 1% of equity loss) but I find I make more WHEN the trade works.....maybe it's 4 or 5 to 1 on my winner vs loser whereas lately it's maybe 2 to 1 in equities if not 1 to 1.

Again, small sample in FOREX but just wondering.
 
forex is for swing trading only , imo. unless you have good flow from your mates at a bank , or you're an expert at reading price , then you really haven't got much edge over those who can/do, but igve it a go, 1% risk sounds good just make sure not to hold a 1% risk with a 10 pip stop trade over the weekend as a nice 200 pip gap could take 20% of your account.
 
i think alot have to do with the many "reversal times" encountered during an equities 6.5hrs intraday session. the potential reversal points are only minutes apart, from 9:30amEST open to 9:35, 10, 10:30, 11:15, 12 (lunch doldrums), 12:30, 1:30, 2:15, 3 (bond market close), 3:30, to 4pmEST close. it is unlikely that you can enter a trade with tight 8cts stop and hold it through lunch doldrums or even till closing. if you widen the stop loss to give room for pullbacks, then you have to take less shares hence affecting the win-to-loss ratio, unless you know how to add shares (and adjust stop) along the way.

with forex, the so-called reversal times are wider apart. forex "day" session starts at 5pmEST roll-over/settlement time to 8pm Tokyo open, volume dries up 11pm, picks up again 2amEST Frankfurt/Paris open, then 3am London open, 4:30am news events, dies down 7amEST, 8am New York open, volatility picks up 8:30am news events, 9:30am equities open, then 11am London close. the reversal times in comparison are hours apart compared to minutes apart in equities.

for example, if you enter long CTSH at 11amEST, http://1.bp.blogspot.com/_buPOR1D4eXw/TLiy-fVBMRI/AAAAAAAAE3A/XFf5pknzilQ/s1600/CTSH.png and got a winner going, you have to close your position for profits by 3:30pm or 4pm close, assuming you are not shaken out by pullbacks. this 4.5 hours hold is considered "long term" trade to a scalper/daytrader.

with forex, if you enter long EUR/USD at 1pmEST, http://2.bp.blogspot.com/_buPOR1D4eXw/TLaHyvhXocI/AAAAAAAAE1g/Zz9wNk52U8w/s1600/EURUSD.png and held it till Tokyo session, you got a +100 to +140pips winner over 11 hours trade. even this is considered "short term" daytrade by many forex traders since it is between Tokyo/London/New York inter-session timeframes. of course you can also scalp for +10pips +20pips just like you can scalp equities for +8cts +15cts.

also, with forex the geometry and patterns are more predictable. in previous EUR/USD picture we know to take profit at -100%/+161.8% fibonacci extension/projection. and in this USD/JPY example, http://4.bp.blogspot.com/_0P0u3evwCqg/TLgLBuJ_1VI/AAAAAAAAESk/mVVPoD_pDrA/s1600/USDJPY.png we know to take profit at 127.2% projection after a AB=CD move. you can't do this kind of analysis with equities since the reversal times are minutes apart and the geometry breaks down. and symbols from one sector to the next sector behaves differently (biotechs, oil, foreign ADRs, healthcare, education, airlines, financials, high tech, etc).

with forex you only concern with each currency's strength/weakness, general market sentiments (risk aversion, risk appetite), cross-currency moves, and match these with you knowledge of price action and maybe some fancy indicators. for example if EUR/GBP shows EUR strength, and USD/JPY shows USD weak, you go long EUR/USD when the risk appetite sets up. there are also less symbols to focus your attention on, compared to 9000 (or more) symbols in equities where you sometimes get caught playing an unfamiliar biotech name or thin volume stock. with forex it is only EUR/USD, GBP/USD, EUR/JPY, AUD/USD, USD/JPY, USD/CHF, AUD/JPY, USD/CAD etc. looks like alot of symbols but it really is only the risk currencies (EUR, GBP, AUD) vs the carry-trade/low interest rate currencies (USD, JPY) with some playing CHF and CAD or even NZD. not too many to focus on and they are all correlated as cross-pairs.

i myself is moving towards forex daytrading even though i still daytrade equities. hope this helps. just my own experience.
 
Quote from VinMan:

Can anyone share real life experience with trading equities vs FOREX.

I am beginning to look at FOREX after seeing that my momo based breakout strategy in equities has not been working (is that edge one?). FOREX seems to trend for me (so far---short sample).

To me, it might be that FOREX 1. trends, 2. has lower costs 3. better leverage 4. more trade opportunities.

Currently I trade the NY session and only EUR/USD using the same money mgt principles as I did with stocks (max 1% of equity loss) but I find I make more WHEN the trade works.....maybe it's 4 or 5 to 1 on my winner vs loser whereas lately it's maybe 2 to 1 in equities if not 1 to 1.

Again, small sample in FOREX but just wondering.
More...

it is a rare person who can clean up from home longterm, trading forex. Watch out for "no problem" posts from anonymous people on this site. Papertrading does not count.

Although no guarantee, equities are a better bet for you.
 
Great post! Thanks!

Quote from bstay:

i think alot have to do with the many "reversal times" encountered during an equities 6.5hrs intraday session. the potential reversal points are only minutes apart, from 9:30amEST open to 9:35, 10, 10:30, 11:15, 12 (lunch doldrums), 12:30, 1:30, 2:15, 3 (bond market close), 3:30, to 4pmEST close. it is unlikely that you can enter a trade with tight 8cts stop and hold it through lunch doldrums or even till closing. if you widen the stop loss to give room for pullbacks, then you have to take less shares hence affecting the win-to-loss ratio, unless you know how to add shares (and adjust stop) along the way.

with forex, the so-called reversal times are wider apart. forex "day" session starts at 5pmEST roll-over/settlement time to 8pm Tokyo open, volume dries up 11pm, picks up again 2amEST Frankfurt/Paris open, then 3am London open, 4:30am news events, dies down 7amEST, 8am New York open, volatility picks up 8:30am news events, 9:30am equities open, then 11am London close. the reversal times in comparison are hours apart compared to minutes apart in equities.

for example, if you enter long CTSH at 11amEST, http://1.bp.blogspot.com/_buPOR1D4eXw/TLiy-fVBMRI/AAAAAAAAE3A/XFf5pknzilQ/s1600/CTSH.png and got a winner going, you have to close your position for profits by 3:30pm or 4pm close, assuming you are not shaken out by pullbacks. this 4.5 hours hold is considered "long term" trade to a scalper/daytrader.

with forex, if you enter long EUR/USD at 1pmEST, http://2.bp.blogspot.com/_buPOR1D4eXw/TLaHyvhXocI/AAAAAAAAE1g/Zz9wNk52U8w/s1600/EURUSD.png and held it till Tokyo session, you got a +100 to +140pips winner over 11 hours trade. even this is considered "short term" daytrade by many forex traders since it is between Tokyo/London/New York inter-session timeframes. of course you can also scalp for +10pips +20pips just like you can scalp equities for +8cts +15cts.

also, with forex the geometry and patterns are more predictable. in previous EUR/USD picture we know to take profit at -100%/+161.8% fibonacci extension/projection. and in this USD/JPY example, http://4.bp.blogspot.com/_0P0u3evwCqg/TLgLBuJ_1VI/AAAAAAAAESk/mVVPoD_pDrA/s1600/USDJPY.png we know to take profit at 127.2% projection after a AB=CD move. you can't do this kind of analysis with equities since the reversal times are minutes apart and the geometry breaks down. and symbols from one sector to the next sector behaves differently (biotechs, oil, foreign ADRs, healthcare, education, airlines, financials, high tech, etc).

with forex you only concern with each currency's strength/weakness, general market sentiments (risk aversion, risk appetite), cross-currency moves, and match these with you knowledge of price action and maybe some fancy indicators. for example if EUR/GBP shows EUR strength, and USD/JPY shows USD weak, you go long EUR/USD when the risk appetite sets up. there are also less symbols to focus your attention on, compared to 9000 (or more) symbols in equities where you sometimes get caught playing an unfamiliar biotech name or thin volume stock. with forex it is only EUR/USD, GBP/USD, EUR/JPY, AUD/USD, USD/JPY, USD/CHF, AUD/JPY, USD/CAD etc. looks like alot of symbols but it really is only the risk currencies (EUR, GBP, AUD) vs the carry-trade/low interest rate currencies (USD, JPY) with some playing CHF and CAD or even NZD. not too many to focus on and they are all correlated as cross-pairs.

i myself is moving towards forex daytrading even though i still daytrade equities. hope this helps. just my own experience.
More...
 
Thank You.


Quote from bstay:

i think alot have to do with the many "reversal times" encountered during an equities 6.5hrs intraday session. the potential reversal points are only minutes apart, from 9:30amEST open to 9:35, 10, 10:30, 11:15, 12 (lunch doldrums), 12:30, 1:30, 2:15, 3 (bond market close), 3:30, to 4pmEST close. it is unlikely that you can enter a trade with tight 8cts stop and hold it through lunch doldrums or even till closing. if you widen the stop loss to give room for pullbacks, then you have to take less shares hence affecting the win-to-loss ratio, unless you know how to add shares (and adjust stop) along the way.

with forex, the so-called reversal times are wider apart. forex "day" session starts at 5pmEST roll-over/settlement time to 8pm Tokyo open, volume dries up 11pm, picks up again 2amEST Frankfurt/Paris open, then 3am London open, 4:30am news events, dies down 7amEST, 8am New York open, volatility picks up 8:30am news events, 9:30am equities open, then 11am London close. the reversal times in comparison are hours apart compared to minutes apart in equities.

for example, if you enter long CTSH at 11amEST, http://1.bp.blogspot.com/_buPOR1D4eXw/TLiy-fVBMRI/AAAAAAAAE3A/XFf5pknzilQ/s1600/CTSH.png and got a winner going, you have to close your position for profits by 3:30pm or 4pm close, assuming you are not shaken out by pullbacks. this 4.5 hours hold is considered "long term" trade to a scalper/daytrader.

with forex, if you enter long EUR/USD at 1pmEST, http://2.bp.blogspot.com/_buPOR1D4eXw/TLaHyvhXocI/AAAAAAAAE1g/Zz9wNk52U8w/s1600/EURUSD.png and held it till Tokyo session, you got a +100 to +140pips winner over 11 hours trade. even this is considered "short term" daytrade by many forex traders since it is between Tokyo/London/New York inter-session timeframes. of course you can also scalp for +10pips +20pips just like you can scalp equities for +8cts +15cts.

also, with forex the geometry and patterns are more predictable. in previous EUR/USD picture we know to take profit at -100%/+161.8% fibonacci extension/projection. and in this USD/JPY example, http://4.bp.blogspot.com/_0P0u3evwCqg/TLgLBuJ_1VI/AAAAAAAAESk/mVVPoD_pDrA/s1600/USDJPY.png we know to take profit at 127.2% projection after a AB=CD move. you can't do this kind of analysis with equities since the reversal times are minutes apart and the geometry breaks down. and symbols from one sector to the next sector behaves differently (biotechs, oil, foreign ADRs, healthcare, education, airlines, financials, high tech, etc).

with forex you only concern with each currency's strength/weakness, general market sentiments (risk aversion, risk appetite), cross-currency moves, and match these with you knowledge of price action and maybe some fancy indicators. for example if EUR/GBP shows EUR strength, and USD/JPY shows USD weak, you go long EUR/USD when the risk appetite sets up. there are also less symbols to focus your attention on, compared to 9000 (or more) symbols in equities where you sometimes get caught playing an unfamiliar biotech name or thin volume stock. with forex it is only EUR/USD, GBP/USD, EUR/JPY, AUD/USD, USD/JPY, USD/CHF, AUD/JPY, USD/CAD etc. looks like alot of symbols but it really is only the risk currencies (EUR, GBP, AUD) vs the carry-trade/low interest rate currencies (USD, JPY) with some playing CHF and CAD or even NZD. not too many to focus on and they are all correlated as cross-pairs.

i myself is moving towards forex daytrading even though i still daytrade equities. hope this helps. just my own experience.
More...
 
Quote from bstay:

i think alot have to do with the many "reversal times" encountered during an equities 6.5hrs intraday session. the potential reversal points are only minutes apart, from 9:30amEST open to 9:35, 10, 10:30, 11:15, 12 (lunch doldrums), 12:30, 1:30, 2:15, 3 (bond market close), 3:30, to 4pmEST close. it is unlikely that you can enter a trade with tight 8cts stop and hold it through lunch doldrums or even till closing. if you widen the stop loss to give room for pullbacks, then you have to take less shares hence affecting the win-to-loss ratio, unless you know how to add shares (and adjust stop) along the way.

with forex, the so-called reversal times are wider apart. forex "day" session starts at 5pmEST roll-over/settlement time to 8pm Tokyo open, volume dries up 11pm, picks up again 2amEST Frankfurt/Paris open, then 3am London open, 4:30am news events, dies down 7amEST, 8am New York open, volatility picks up 8:30am news events, 9:30am equities open, then 11am London close. the reversal times in comparison are hours apart compared to minutes apart in equities.

for example, if you enter long CTSH at 11amEST, http://1.bp.blogspot.com/_buPOR1D4eXw/TLiy-fVBMRI/AAAAAAAAE3A/XFf5pknzilQ/s1600/CTSH.png and got a winner going, you have to close your position for profits by 3:30pm or 4pm close, assuming you are not shaken out by pullbacks. this 4.5 hours hold is considered "long term" trade to a scalper/daytrader.

with forex, if you enter long EUR/USD at 1pmEST, http://2.bp.blogspot.com/_buPOR1D4eXw/TLaHyvhXocI/AAAAAAAAE1g/Zz9wNk52U8w/s1600/EURUSD.png and held it till Tokyo session, you got a +100 to +140pips winner over 11 hours trade. even this is considered "short term" daytrade by many forex traders since it is between Tokyo/London/New York inter-session timeframes. of course you can also scalp for +10pips +20pips just like you can scalp equities for +8cts +15cts.

also, with forex the geometry and patterns are more predictable. in previous EUR/USD picture we know to take profit at -100%/+161.8% fibonacci extension/projection. and in this USD/JPY example, http://4.bp.blogspot.com/_0P0u3evwCqg/TLgLBuJ_1VI/AAAAAAAAESk/mVVPoD_pDrA/s1600/USDJPY.png we know to take profit at 127.2% projection after a AB=CD move. you can't do this kind of analysis with equities since the reversal times are minutes apart and the geometry breaks down. and symbols from one sector to the next sector behaves differently (biotechs, oil, foreign ADRs, healthcare, education, airlines, financials, high tech, etc).

with forex you only concern with each currency's strength/weakness, general market sentiments (risk aversion, risk appetite), cross-currency moves, and match these with you knowledge of price action and maybe some fancy indicators. for example if EUR/GBP shows EUR strength, and USD/JPY shows USD weak, you go long EUR/USD when the risk appetite sets up. there are also less symbols to focus your attention on, compared to 9000 (or more) symbols in equities where you sometimes get caught playing an unfamiliar biotech name or thin volume stock. with forex it is only EUR/USD, GBP/USD, EUR/JPY, AUD/USD, USD/JPY, USD/CHF, AUD/JPY, USD/CAD etc. looks like alot of symbols but it really is only the risk currencies (EUR, GBP, AUD) vs the carry-trade/low interest rate currencies (USD, JPY) with some playing CHF and CAD or even NZD. not too many to focus on and they are all correlated as cross-pairs.

i myself is moving towards forex daytrading even though i still daytrade equities. hope this helps. just my own experience.
More...

bstay,

I auto-daytrade US equities (pre-market and core sessions, i.e. 4am – 4pm EST). I would like to add another instrument class to my trading, and plan to investigate FOREX at some point in the near future (i.e. hopefully next few months!).

You have obviously done this research already and migrated down a similar path. Therefore, I hope you will excuse some naive questions (hopefully, you don’t find them offensively naive!).

1. Volume – I am confused as to whether good/meaningful volume data is available trading FOREX. I once read somewhere that it isn’t. Is it?

2. Fragmented market – in the same way US equity traders must contend with NYSE, AMEX, NASDAQ, ECNs, dark pools, internalised orders, etc, I am under the impression that the FOREX market is principally interbank, and so fragmented, too. Is this correct?

If good cash FOREX volume info is not available, and if the cash FOREX market is indeed as fragmented as I suspect, it might be better to trade FOREX futures (good volume info, and single central exchange). What do you think?

Thanks.
 
Quote from abattia:

1. Volume – I am confused as to whether good/meaningful volume data is available trading FOREX. I once read somewhere that it isn’t. Is it?
More...
Futures have the cleanest volume data as you suggested. The problem is futures are actively traded in USD pairs (and not crosses) and cover only 3%-5% of the market for the corresponding pair. If there is significant buying/selling, the volume will almost necessarily propagate into futures. Note that the spread between spot and futures is very stable. So, you can source signal from futures and trade spot if you wish.

Quote from abattia:

2. Fragmented market – in the same way US equity traders must contend with NYSE, AMEX, NASDAQ, ECNs, dark pools, internalised orders, etc, I am under the impression that the FOREX market is principally interbank, and so fragmented, too. Is this correct?
More...
Lots of large transactions indeed involve a bank as a dealer and may happen on the phone, not electronically. However, 2-3 largest ECNs reportedly cover over 50% of the volume. So, it's not that bad.
 
Quote from LeeD:

Futures have the cleanest volume data as you suggested. The problem is futures are actively traded in USD pairs (and not crosses) and cover only 3%-5% of the market for the corresponding pair. If there is significant buying/selling, the volume will almost necessarily propagate into futures. Note that the spread between spot and futures is very stable. So, you can source signal from futures and trade spot if you wish.

Lots of large transactions indeed involve a bank as a dealer and may happen on the phone, not electronically. However, 2-3 largest ECNs reportedly cover over 50% of the volume. So, it's not that bad.
More...

Thanks.
 
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