Stock Trading vs Forex - Adjustments

Beginner Questions
1

Hi all,

I`ve mostly been learning about stock trading (swing trading, which means a trade per 2-7 days or so), using technical analysis (almost only, because company fundamentals only come out 4 times a year).

Because I have found the forex market to be more superior (no bankruptcy risk, higher liquidity, more volatile, longer market hours, lower commissions esp. with smaller capital) than trading stocks, I am trying to make a transition, however, I don`t know how to make that transition;

Have been through the pipschool one time (and one time when I was like, 16).
I learned learned trading by the books Trading For A Living, by alexander elder;
His strategy in short:
-Using three windows, medium for finding trades, long term for macro trend (always trade WITH the trend), and short term for entry and exit. usually by a multiple of 5 f.ex approx. 15 min<60 min<4 or 6 hour charts.
-Money management; never risk more than 2%, limit risk with stop loss
-Tools: use a mix of trend setter and oscillators (oscillators on shorter term, and trend setters/establishers on long term charts.)
I use MACD, Stochastics, Bollingers Band…
And OH also classics such as support and demand, general trend lines.

I`ve seen a tendency of using fibonnaci and other pivot points in forex, I always thought of this as random “tool”. How well used/successful is this?

Anyone with any inputs as to how to turn my method over to forex?
Any books that people here would agree upon as essential, or any widely used forex books, on strategy?
Any tools is should use in favor of others?
Also, should I focus on a FEW major pairs, e.g. 3, or should I constantly browse and look for trade set-ups? I tried trading the USD/NOK but the spread was waaaaayyyyy to high for a newbie, I feel at least… Will focus on EUR/USD. Which btw, just finished a cute 45 pip long trade on :slight_smile:

Last Question for the day: Could you feasibly Just change your chart time focus e.g. from 4H to 1H, (with multi screen systems, change these too) whenever you don`t have a set-up with your usual time frame? I mean, in theory, the tools and your system of choice should work with any time frame, right? Or would this be too confusing?

Currently, a finance major with focus on investment, have known about forex since I was about 16, then forgot about it, now I rediscovered it. Because I`m in college it will take longer to learn! It shall be done, but take longer :stuck_out_tongue:

Thanks for making it all the way through! Hope to get help,
thanks!:rolleyes:

2

OH, and with regards to fundamentals, could you guys give me a pointer to where I could learn more about this? As I understand it, fundamentals is key to forex, at least more so than stocks, and news are more important to fluctuations.

And yeah any books about forex strategy would be grately appreciated xD
Thank-a-yoooooo!

3

Ooohhh…

My favourite subject (I promise you I wont get carried away on your thread like I usually do)!!! LOL!!!

Why not trade the major indices instead of individual stocks???

Why not trade commodities???

THEORETICALLY: any and all indicators SHOULD work on ANY timeframe. I dont’ believe this. For one thing: I believe that the DAILY CLOSE is an ALL IMPORTANT price. Who cares where the Dow or the S&P 500 is at 10h17??? THOSE traders care where they CLOSE at the end of the DAY. Obviously: if you’re using indicators then whatever they’re telling you at the end of the DAY is WAY more reliable than on the shorter timeframes.

One other MAJOR issue you have with forex (in light of the above): there are as many different CLOSING prices worldwide as there are brokers in different timezones. If you’re using pivots: you’re going to get AS many different readings / values. If you’re trading on-exchange: you don’t have this problem i.e. ALL the traders using pivots have the SAME readings / values.

For what it’s worth: on-exchange instruments are regulated (although that didn’t help things too much a while ago did it let’s face it)!!! LOL!!!

You have SOOO much more information available to you when it comes to equities and commodities (financial statements, weather reports, you name it). This is IF you’re going to factor in fundamentals of course (as opposed to following a purely technical trading system).

Most of these indicators that we all tend to TRY and use have been around for a LONG while and what most people don’t realise is that the people that designed / developed these indicators were NOT forex traders (forex trading being RELATIVELY new in the bigger picture of things).

Trading equities and commodities: market psychology (‘people’) play a MUCH bigger role.

Volume: forex trading volume readings mean nothing (at best you’re seeing the volume being traded at your particular broker nothing more).

Enough already (for now)!!! LOL!!!

As a matter of fact: somewhere around here is a thread dedicated to this very same issue of forex vs. equities and commodities.

On a personal note: you’ve read my other post today and I can tell you that (with the exception of a single particular trade) I’m ‘nett up’ on trading equities and commoditeis and ‘nett down’ on forex. And nothing was done differently i.e. same trading system(s) but forex vs. equities and commodities being the only difference (all personal shortcomings being factored in equally of course)!!! LOL!!!

Regards,

Dale.

4

kummi90

Keep an eye on this web site, following these guys will give you a little bit of an idea how the big players move the market up and down.

Why S/R price levels are so important in trading FX, why trends run smack into brick walls turning on a pip and why some of the trend following systems don’t have much long term follow through. GOOD STUFF! :slight_smile:

Forex News by Forex Live

5

Fundamentals are no more important to forex than they are to any other market. It may seem that way because there are so many news items that can impact them, but news and fundamentals are not the same thing.

Fundamentals in the forex market basically come down to the stuff you learned about in your Macro econ class - buy you have to remember you’re dealing with relationships between economies.

As for Dale’s [I]“Trading equities and commodities: market psychology (‘people’) play a MUCH bigger role.”[/I], I will respectfully disagree 1000%. All you have to do is look at how the dollar trades to see that the forex market is MASSIVELY influenced by psychology.

6

Dale: Thanks for reply! I guess I wanan stick with forex for the time being, as I just started learning, i don`t wanna skp’ip to commodities, at least for now. the equities markets, like I said, is good, but for someone just starting with a small account, you get eaten up fast by commissions, you know.

I`ve heard there are quite few forex books out. BTW, the people out there who made a transition from equities to forex, I wanna make a successful transitions.
How is my “strategy” looking from my first post, how could I modify this to fit forex market. Which tools, etc. and my other questions? Thanks!

d-pip: You seem to have been here a long while, given your amount of posts, what do YOU think regarding my questions? :stuck_out_tongue:

rhodytrader: Okay, this is what I thought, Keep track of major econ. releases from countries, export vs import etc. But is babypips`news feed sufficient for fundamental info?

And again, anyone know any forex books with strategies regarded as good, universal, or “the most” used, a popular one?

And my other questions xD

Thanks for help guys!! Appreciated!

7

I traded stocks, DIA & SPY before FX mostly using 20 over 40 moving averages along with the MACD. My set up worked with stocks but didn’t translate over to FX very well. FX seems to be more geared around support and resistance levels and price action between the S/R levels.

I’d suggest you first start demo trading FX with your stock trading set ups, spend as much time in front of the screens as you can. And go through and read some of the older babypip threads and try to get a feel for the whole gig. There’s a lot to it! :eek:

Here are a few links to some of my favorite oldies but goodies.

http://forums.babypips.com/newbie-island/29084-bollinger-band-trading-mas.html

http://forums.babypips.com/newbie-island/33733-multi-time-frame-trend-trading.html

301 Moved Permanently [I]Google and try to find “The EMA Step System” ebook, it’s a nice little method based on a 5 EMA and bolls bands. [/I]

http://forums.babypips.com/free-forex-trading-systems/6632-alternative-technical-templates.html

http://forums.babypips.com/free-forex-trading-systems/19076-technical-templates-2-a.html

http://forums.babypips.com/free-forex-trading-systems/29863-london-breakout-1-a.html

good luck!

8

Okay, thanks for your help. Much appreciated!
I guess the SPY was used as day trading then? Why is this so common? Because of liquidity and volatility?

But yeah, looking at my basic strategy outline in my first post, would you say Im heading in the right direction? Ill look at your links later, now I`ma watch some links my broker sent me. Lol FXCM called me today to check up on my, offer me info and stuff. I just opened a demo account, pretty GOOD service, that!!!

9

Yeah, start off using your Stochastics, Bollingers Bands and trend lines. Maybe drop the MACD…

Throw up the 4 hour, 1 hour, 15m and even the 5m & 1m charts and watch a few of them as Elder suggests. Maybe stick with just EUR/USD at first.

I’ve heard good things about FXCM. I don’t use them but I’ve demo their platform and it’s nice.

Is it the first time you’ve used a FX platform? If so you’re about to enter a whole new world, have fun and enjoy it! :smiley:

10

Ayte, thanks d-pip! Will take into consideration!
How are your FX adventures coming along, btw?
:wink:

12

Hello,

Well: I wish you well in your forex endeavour. I really do. As I’ve noted: I believe that equities and commodities are ‘where it’s at’ for the reasons given. Just one thing though (just a general comment): with a good technical trading system there’s technically no difference between trading forex or equities and commodities. However: they all MOVE differently and THAT’S what makes the difference.

But like I said: I wish you well. If I can help you in any way then please feel free to ask (although when it comes to forex I’m pretty sure you’re going to get WAY more valuable and LESS NEGATIVE input from others)!!! LOL!!!

Anyway: I’m posting here this morning because yesterday I heard something really fascinating during the financial news hour on one of our national radio stations. If you look back I was saying that psychology or ‘people’ play a bigger role in causing price movements in equities and commodities. Well wait until you read THIS!!! LOL!!! And no: as John (rhodytrader) well knows I ALWAYS respect his opinion so I’m not saying I’m right and he’s wrong or visa versa. I just thought this was quite interesting!!!

Basically: researchers at Indiana University and the University of Manchester say that tools measuring degree of calmness on Twitter predicted movements in the Dow 2-6 days in advance with 87.6% accuracy (at or around the time of the sub-prime crisis I think they said). How about THAT!!! That’s really something is it not??? LOL!!! I’ve found a document that details the research and the results (attached).

Here’s some additional information: Twitter as stock market predictor - The Economic Times

Regards,

Dale.

Twitter Mood Predicts The Stock Market.pdf (345 KB)

14

Thanks dpaterso, that`s very kind of you :slight_smile:
So do you trade only commodity and equity yourself? Why are you here on a FX forum then? Hmm… xD

yes, you are right, that is rather interesting! I guess mass psychology has a huge effect on the market, at least in the short term. This has been known a long time though. As for the commodity market, what do you think? Mass psychology?
Speaking of commodity, some time ago I read something about a huge grain crop fail in Russia (in Russia, grain crops FAIL YOU!). Anyways, does that mean commodity price for grain will rise? I looked at crop based ETFs within a week of the news, however no trace of effect. Will it effect the long term? I dont know how well you know about this subject, but I will ask still xD

15

Hello again,

Why am I here??? Well I started out here (with forex) and I’ve made some good ‘friends’ here. I guess I feel ‘comfortable’ here to be honest. I also believe that (my forex vs. equities and commodities ‘bias’ aside) I can still help out from time to time. That’s basically ‘it’ really.

Commodities: well this is what I was saying. I don’t believe that even after all my ‘accelerated learning’ and time spent: I have the knowledge or understanding to act on fundamentals of any kind hence my ‘banging on’ about purely technical trading systems. I’ve tried to ‘get with the program’ as far as the fundamentals of ANY market are concerned: normally with disastrous results!!! LOL!!! So yeh: if you’re the kind of person that can make SENSE of fundamentals and news then you have all of this additional information available to you. Me: I’m just not one of those people but at least the information is AVAILABLE (as a matter of fact I get a daily update from the CBOE for all commodities and I DO READ it but I’d never base a trade decision on anything ‘as I THINK I understand it’ i.e. I just take signals from those technical trading systems that I was talking about)!!! LOL!!!

Regards,

Dale.

16

AHH okay, so you use the same technical skills?
Hmm, I would assume your profitability would rise if you learned fundamentals, i mean at least your rate of success and therefore profits would increase.

17

Well there is another way:

I could interpret the fundamentals and the news data and then do the TOTAL opposite of what my logic and understanding is telling me!!! LOL!!! That would CERTAINLY work!!! LOL!!! Highly scientific!!!

Nah: I think for now I’ll rather ‘plod along’ with ‘ye olde’ (pure) technicals!!!

Regards,

Dale.

18

Haha xD! Might work if you REALLY suck with fundamentals!
Have a good weekend, Dale :wink:

If anyone can help me with original questions in post 1 that haven been addressed, please help!

Thank you all, and to all, good night!