I have noticed that indices showcase some of the most volatile market movement you can find. With that in mind, Does one form trading setups the same way you would on the more forgiving currency markets or are their specific methodologies to use to trade indices?
I don’t think there is a need to modify the basis of one’s trade setups when trading indices, but there are certainly differences.
Whether one uses indicators or Price Action or a combination of both, the same formations and combinations, etc, occur.
Perhaps the biggest difference is the ability of indices to move very fast and very far. This means stoplosses have to be further away and targets can be more ambitious.
Indices also seem to have a tendency to go through some rough passages of oscillating price ranges during periods of trend change, and this can be tricky to handle.
There may also be reason to consider using different timeframes due to the higher volatility and movement sizes.
Yes - timeframes - strange as it may seem, oscillating price ranges on 5mins can be smoothed out into micro trends on the 1min chart.
indices are good if you want to diversify portfolio but because of gaps strategies are harder to backtest
Bear in mind these are exceptional times, look at the weekly charts on the major USA indices, before and after the Pandemic ,now we have the east European conflict and rise in interest rates ,making them less predictable
Bear in mind, strategies should be prepared for that kind of situation.