Why do most of the top traders prefer trading Index (USDX, US30, GER30, UK100) and some commodities instead of forex? Does anyone have an explanation?
And who are those top traders you are speaking of?
I could tell you why I trade indices. They behave a lot like individual stocks. There is a real market open and a market close, there are gap and go’s and gaps to be filled, there is decent opening volatility.
The top traders I’m referring to market wizards.
Go and ask tradertom.com. He is very helpful.
In one hour when London and NY opens there are many indicies trading opportunities that Tom utilises. The DAX is GER 40. And FTSE100 is later followed by NASDAQ & DOW.
IMO, his August swing trading with FX currency pairs were not as successful.
are you sure that tom is not a trend trader…
Or i am missing something here…
I think indexes and commodities are used by traders to protect against specific risks, such as inflation, currency volatility, or market falls.
I think it is because commodities are less affected by political events and central bank decisions. Generally, the choice between assets most of the time depends on the trader’s trading style, goals, risk tolerance, and market expertise. And an important point is that selecting investments, commodities, or forex should align with our strategies and preferences.
I would say mid traders trade those big traders still trade currencies like Soros likes the nzd usd
Diversification, macro analysis, liquidity, predictable volatility, fewer instruments, transparent regulation, and natural hedging.
That’s due to clearer trends and less complex factors than forex. These instruments offer diversified exposure to market sentiment, often leading to more predictable price movements, while minimizing the impact of individual country news
More bang for you bucks -
ATR for 5mins EUR/USD approx 7max
ATR for 5mins DOW approx 30max
ATR for 5mins NASDAQ approx 25max
That makes no sense when the margin requirements are so different. I can trade way more than 5 times the position size on eurusd than I can on DOW. So there’s more bang for your buck on that.
But the big moves are easier to follow, so having a big account and predictable movement is better for profits than the market that has the highest possible return.
Yes - but you have said it yourself ‘you are putting 5 times as much on’. In other words it is costing you 5 times more. I put $1 on Dow - you put $5 on eurusd - which is more cost effective?
And at least with my broker, minimum position size is higher in forex with relatively higher and variable spreads, too, compared with fixed and relatively lower spreads in the major indices.
Spread with 0.01 lot is 1,2 cents in the DAX. Lowest position size in forex is 400 € for me, with at best 0,6 - 0,9 pips / 2,4 - 3,6 cents spread in the EUR/USD.
In addition to that, I don’t like the price movements in forex on the lower timeframes. It’s pure chop chop and untradeble for me most of the time.
If one want’s to trade the lowest timeframes, forex isn’t the right vehicle IMO.
They are less volatile to news reports