How is Forex market different from the Stock Market in terms of technicals?

kkeskar92 · #11 20th July 2007, 09:40 PM

I have been trading forex mini-accounts since last 1 year and it is entirely different from stock market.
1. 95% traders lose money in forex and I am among them

2.if you take long/ short position in one currency, you have to take opposite position in another currency
3. it is affected greatly by fundamentals of two countries of the pair and also by other countries economies
4.market is sleeping or not moving most of the times and is extremely volatile during major news events
5. brokers trigger the stop-losses and do not allow to trade during news time
6. technicals do not work in forex
7.pivot points work since it trades range of the day, but not reliable during news times
8.most of the volume is not speculative
The book that gives realistic picture of forex marke is ' bird watching in lion country' by Dirk Dutoit.

This is the link that gives some idea about how forex market works.

http://www.forexbastards.com/public/...trading_system

CreditViolet · #12 20th July 2007, 09:52 PM

Well said kksekar, most of your points apply to stock markets as well.

glamsham · #13 21st July 2007, 08:26 PM

Quote:

Originally Posted by Parv

How is Forex market different from the Stock Market in terms of technicals?

People say Forex market is the worst to deal with. If the same principles of TA is applied why should Forex market be different from the stock market.

Regards
Parv

I guess, no one here has ever traded Forex.

I have been trading in Forex throught my life based on Fundamental Analysis and Technical Analysis in Forex. I have even traded USD-DEM (USD/German Mark) before the launch of the EURO. Even traded the USD-JPY in the carry meltdown in 1998.

First of all...The differences in terms of Technicals....

1) Forex are a 24 Hour Market, therefore you dont have gaps or any thing like that.

2) 90% of the forex market is OTC (Over the counter) and hence there are NO Volumes reading or anything to rely on.

3) Differently to the common perception, Forex are the least volatile market globally. The currencies hardly move more than 1% in any session while for stocks or commodities, these would be boring moves.

4) Different pairs move at different times, like the Australian Dollar would move in Morning Sydney sessions and the US Sessions. While, the GBP would move in London timings and US Timings.

5) For Intraday Traders, Forex Markets are brutal, as stops are taken out heartlessly.

6) In Intraday sessions, you would NOT have sustained buying or selling. Instead, you would have sharp upmoves and downmoves based on Economic data releases.

If markets are near one extreme of one range and the common perception is that market would be going for stops, above the market, then prepare to be shocked. Markets would be doing the opposite.

7) Trend lines are very very often broken, stops eaten and then back again above that.

I would NOT like to discuss the Fundamental Aspects here.

glamsham · #14 21st July 2007, 08:44 PM

1. 95% traders lose money in forex and I am among them

100% Correct. I am NOT in that 95%, otherwise, I would NOT have survived 15 years in the market.

2.if you take long/ short position in one currency, you have to take opposite position in another currency

NO. If you are long in EUR-USD and also Long USD-JPY, then you are synthentically long EUR-JPY, as the prices for EUR-JPY are calculated by...

EUR-JPY = EUR-USD * USD-JPY.

3. it is affected greatly by fundamentals of two countries of the pair and also by other countries economies

Yes and No. Forex Fundamentally depends upon interest rate expectations between 2 countries. However, since Dollar is currently the reserve currency of the world, the broader Dollar trend is also likely to explain the market action. However, if so, its easy to spot the weakness as one would see the cross rate of the two "Outperforming" currencies relative to the dollar. The Fundamentals and only Fundamentals determine where the currencies go.

4.market is sleeping or not moving most of the times and is extremely volatile during major news events

Correct.

5. brokers trigger the stop-losses and do not allow to trade during news time

Yes, that happens if one trades the spot market with the online brokerages. However, it does NOT happen in the interbank Market, where I trade.

6. technicals do not work in forex.

Wrong. As with fundamentals, technicals also work. However, as everything they work Long term. If technicals work anywhere, it would be forex, as its as close to "Perfect Compedition" as one gets. One of the groundwork of Technical Analysis is "Mass Participation".

7.pivot points work since it trades range of the day, but not reliable during news times

As anything, it depends upon the "Degree of variability" of the data relative to expectation. The bigger the surprise in data, the bigger the move. Also pay attention to revison to the data for the previous months, when trading US NFP.

8.most of the volume is not speculative

Wrong. Over 70% of the forex positions are squared off Intraday and almost 96% is squared in the week. Hence by any standards, its the most speculative market in the world.

glamsham · #15 21st July 2007, 08:50 PM

What I have not talked about is that "How does Options Market positioning effects the spot prices". Since Forex has Exotic options with KO and stuff.

glamsham · #16 21st July 2007, 08:58 PM

One more thing......Forget E-Waves and Forex Trading, particularly Yen Crosses.

loosingstreak · #17 22nd July 2007, 06:43 AM

Hello glamsham,

I normally trade the60 min and a doing fairly well. Do you suggest a longer time frame. Any suggestions welcome.

glamsham · #18 22nd July 2007, 10:50 AM

Quote:

Originally Posted by loosingstreak

Hello glamsham,

I normally trade the60 min and a doing fairly well. Do you suggest a longer time frame. Any suggestions welcome.

Hi Loosing streak..

Why such a name. Its Depressing. You may need a Prozac soon LOL.

I would recommend you to do what you are comfortable with. Even 1 minute chart works, if you know when one knows where to keep a SL. On the otherhand, even a weekly chart does NOT work, if someone does not know how to trade.

Its Different strokes for different folks!!!

loosingstreak · #19 22nd July 2007, 10:55 AM

Ah , the name is just to keep reminding myself not to get too overconfident and indisciplined or the next string of losses are just around the corner.

A good trade is all the prozac I need.

Parv · #20 23rd July 2007, 09:47 PM

Quote:

Originally Posted by glamsham

I guess, no one here has ever traded Forex.

I have been trading in Forex throught my life based on Fundamental Analysis and Technical Analysis in Forex. I have even traded USD-DEM (USD/German Mark) before the launch of the EURO. Even traded the USD-JPY in the carry meltdown in 1998.

First of all...The differences in terms of Technicals....

1) Forex are a 24 Hour Market, therefore you dont have gaps or any thing like that.

2) 90% of the forex market is OTC (Over the counter) and hence there are NO Volumes reading or anything to rely on.

3) Differently to the common perception, Forex are the least volatile market globally. The currencies hardly move more than 1% in any session while for stocks or commodities, these would be boring moves.

4) Different pairs move at different times, like the Australian Dollar would move in Morning Sydney sessions and the US Sessions. While, the GBP would move in London timings and US Timings.

5) For Intraday Traders, Forex Markets are brutal, as stops are taken out heartlessly.

6) In Intraday sessions, you would NOT have sustained buying or selling. Instead, you would have sharp upmoves and downmoves based on Economic data releases.

If markets are near one extreme of one range and the common perception is that market would be going for stops, above the market, then prepare to be shocked. Markets would be doing the opposite.

7) Trend lines are very very often broken, stops eaten and then back again above that.

I would NOT like to discuss the Fundamental Aspects here.

Hi Glamsham
thanks a lot for your inputs. I'm sure with tons of experience you'll help me out. I'm a totally new to Forex markets.

Parv

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