The real reason for the extreme tough trading in the FX?

L

livermoreorless

I have been debating whether to diversify my trading into forex in addition to stocks and futures but I've read and heard from many other experienced traders that currency is actually one of the hardest trading instruments.

I looked at some of the EUR and GBP charts and must admit that pound-for-pound, it does look a lot faster/volatile.

I calculated some potential trades and the profits/loss would have been near 3x DJIA futures and almost 8x stocks.

Can anyone provide a reason for this large discrepancy?

Much appreciated
 
Since you did all of these calculations already, then what size was your avg gain and avg loss? What data source are you using and is it, tick, min, daily data?

How many data points did you look at? 1 month's worth of data? 1 year? Cash data? Futures data?

A lot of things out there have nice looking intraday charts but as soon as you trade it, poof! You find out the slippage is huge or orders take several seconds or data does not match broker's, etc, etc. So, did you account for these possibilities too?
 
Quote from livermoreorless:

I have been debating whether to diversify my trading into forex in addition to stocks and futures but I've read and heard from many other experienced traders that currency is actually one of the hardest trading instruments.

I looked at some of the EUR and GBP charts and must admit that pound-for-pound, it does look a lot faster/volatile.

I calculated some potential trades and the profits/loss would have been near 3x DJIA futures and almost 8x stocks.

Can anyone provide a reason for this large discrepancy?

Much appreciated
More...

I don't understand what you mean at all considering that speed of losses/gains is completely dependent on account size, leverage, and position size.

A 100:1 position moves 10x faster than a 10:1 position, so on and so forth...
 
I think he's talking about in relation to trends and signals.

Anyway, the best reason I've heard and come up with would be that the high and varying leverage creates a lot of unnatural and temporary imbalances in supply and demand, which will create many swinging, meaningless moves.

I don't know if anyone knows the real answer, but I don't think it matters much.

Good luck.
 
Quote from ScapGF:

I don't understand what you mean at all considering that speed of losses/gains is completely dependent on account size, leverage, and position size.

A 100:1 position moves 10x faster than a 10:1 position, so on and so forth...
More...

the leverage on forex is higher and so the swings in the trading account is magnified by the bigger multiple.
 
I think trading Forex is less risky than trading stocks, that is if you know what you are doing. This will however take years and many tears before it can be mastered.
 
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"The foreign-exchange market is often referred to as the Slaughterhouse where novice traders go to get 'chopped up'. It is one of egos and money, where millions of dollars are won and lost every day and phones are routinely thrown across hectic trading desks. This palpable excitement has led to the explosion of the retail FX market, which has unfortunately spawned a new breed of authors and gurus more than happy to provide misleading and often downright fraudulent information by promising traders riches while making forex trading 'easy'.

In reality, the average client's trading approach combined with the unscrupulous practices of some brokers make spot FX trading more akin to the games found on the Vegas strip than to anything seen on Wall St. The FX market is littered with the remains of day traders and genius 'systems,' and to survive in the long-run traders have to realize that they are playing a game where the cards are clearly stacked against them."

http://www.amazon.com/Beat-Forex-De...=sr_1_3?ie=UTF8&s=books&qid=1245720224&sr=8-3
 
In my opinion forex has too many chop days. But there are days that it will just trend wonderfully. You have to know to stay out during the chop.

And don't trade with a deal desk either.
 
Quote from fxtrader29:

the leverage on forex is higher and so the swings in the trading account is magnified by the bigger multiple.
More...
Buying a penny stock at 1:1 can be much more volatile than a 10:1 FX position.

Like I said, it TOTALLY depends on how much leverage is used, therefore it is absurd to make the blanket statement that forex is always more difficult to trade than X, Y, or Z.

Remember, nobody is forced to use extreme amounts of leverage.

The only way to say that one instrument is more volatile than another is to first look at the average daily percentage movement for similiar time periods and then go from there.
 
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