Ok haven't posted in a while but I really liked reading what replaced had to say and his analysis. I"ll add my 2 cents..
Reason why a lot of people find trading Equities or buying equities more profitable, sometimes me included is because you can value a business with certain metrics in place. And if it pays a dividend, you get cash flow to hold the equity until it reaches your valuation for exit. Its very hard to measure a currency with any kind of a metric. Its more of a Central Bank/interest rate driven instrument. A stock of a company is based on the performance of the business generally, now I'm saying generally because you do have high valued stocks of companies that aren't profitable like Tesla for example. But generally, a stock or a business is easier to analyse and a companies CEO has an obligation to its shareholders to make sure that the company does well and their shareholders get rewarded. You don't necessarily have that situation in currencies, it usually is kept stable and within a range and at extremes is talked up or talked down by CBs. They generally want currencies to be in a tradeable band where it doesn't cause hardships on the economy. Case in point, Abe in the yen situation. It was getting extremely strong, and due to their local export businesses suffering, they launched a currency devaluation program and basically weakened the yen. Those types of macro situations are the best and most profitable trades in currencies in my opinion.
Another reason why some equities are easier to trade is because of volatility. There are many equities that move way more than currencies. Its not uncommon to see a stock go up 10-20%, on the small caps alot of stocks have day ranges that are in the few % which makes it popular with the day traders. I remember during the financial crisis when Citigroup dropped to $3, it was a very popular instrument to trade, it was cheap to get into, moved a good percent on a day, and you had a feeling of where the floor was based on the valuations of that time. But in FX, when currencies move 5-10%, its usually in response to a crisis or a Central Bank policy, and its not common, hence FX traders end up using a lot of leverage to try to capitalize on the smaller moves. And that's where alot of traders get into trouble! They get caught up in the noise. Pros who trade FX can determine what is noise and stay away until situations are favorable to their strategies.
Just think of it from a business standpoint, why do most institutional brokers don't allow high leverage and why do alot of bucketshops will give you bonuses to trade with them and give you high leverage like 200:1 or 1000:1. Because its just math, they know the odds are with them and if you do end up making money with those odds, you are the statistical anomaly not the norm. So as a business it makes sense. I think, all traders should take a look at how the FX broker business is run, and how they assess their clients and how they manage their A and B books, they will really understand why most traders and most short term traders fail. Now longer term traders are actually bad for business, you churn a lot less, you pay less commission, you have less leverage thus your swap fees are less and you are statistically less likely to get shaken out of your position. And that is what Relevance was trying to point out I believe, that low leverage and long term traders, mathematically have a better chance, and hence the old trading proverb, cut your losers short and let your winners run. Jesse livermore is a good example of that, he wrote that the most money he has made is by sitting on his hands, which means most of his outsized returns came from being on the right direction of a long term trend.
Yes, there are alot of patterns at play on the intraday levels, due to flow, and technicals some are exploitable. Problem is, most people don't have proper understanding of how to assess those and they fall also into the trap of playing all the patterns all the time. Now the people/pros that are able to exploit intraday trading, generally have a good understanding of FX flow and are able to maintain good money management and have high expectancy of their trade going their way. Alot of traders get wrapped up into this thing where they want 1:2 o 1:4 risk to reward and will generally have no idea of expectancy of their trade getting into profit and arbitrarily set tp and SL just to satisfy those requirements.
Another point I wanted to address was that of bots being stupid. There are alot of different bots, bots that are generally used by institutions are good at what they are programmed to do. There is a reason why the majority of trading volume now done by banks are all algos/bots. Just to get something clear, "trading" is done by bots in the institutional space, mainly because of speed and the ability to calculate a multitude of variables simultaneously. The stock picking and investment themes are still created by humans.
Sorry for the extended post..
Reason why a lot of people find trading Equities or buying equities more profitable, sometimes me included is because you can value a business with certain metrics in place. And if it pays a dividend, you get cash flow to hold the equity until it reaches your valuation for exit. Its very hard to measure a currency with any kind of a metric. Its more of a Central Bank/interest rate driven instrument. A stock of a company is based on the performance of the business generally, now I'm saying generally because you do have high valued stocks of companies that aren't profitable like Tesla for example. But generally, a stock or a business is easier to analyse and a companies CEO has an obligation to its shareholders to make sure that the company does well and their shareholders get rewarded. You don't necessarily have that situation in currencies, it usually is kept stable and within a range and at extremes is talked up or talked down by CBs. They generally want currencies to be in a tradeable band where it doesn't cause hardships on the economy. Case in point, Abe in the yen situation. It was getting extremely strong, and due to their local export businesses suffering, they launched a currency devaluation program and basically weakened the yen. Those types of macro situations are the best and most profitable trades in currencies in my opinion.
Another reason why some equities are easier to trade is because of volatility. There are many equities that move way more than currencies. Its not uncommon to see a stock go up 10-20%, on the small caps alot of stocks have day ranges that are in the few % which makes it popular with the day traders. I remember during the financial crisis when Citigroup dropped to $3, it was a very popular instrument to trade, it was cheap to get into, moved a good percent on a day, and you had a feeling of where the floor was based on the valuations of that time. But in FX, when currencies move 5-10%, its usually in response to a crisis or a Central Bank policy, and its not common, hence FX traders end up using a lot of leverage to try to capitalize on the smaller moves. And that's where alot of traders get into trouble! They get caught up in the noise. Pros who trade FX can determine what is noise and stay away until situations are favorable to their strategies.
Just think of it from a business standpoint, why do most institutional brokers don't allow high leverage and why do alot of bucketshops will give you bonuses to trade with them and give you high leverage like 200:1 or 1000:1. Because its just math, they know the odds are with them and if you do end up making money with those odds, you are the statistical anomaly not the norm. So as a business it makes sense. I think, all traders should take a look at how the FX broker business is run, and how they assess their clients and how they manage their A and B books, they will really understand why most traders and most short term traders fail. Now longer term traders are actually bad for business, you churn a lot less, you pay less commission, you have less leverage thus your swap fees are less and you are statistically less likely to get shaken out of your position. And that is what Relevance was trying to point out I believe, that low leverage and long term traders, mathematically have a better chance, and hence the old trading proverb, cut your losers short and let your winners run. Jesse livermore is a good example of that, he wrote that the most money he has made is by sitting on his hands, which means most of his outsized returns came from being on the right direction of a long term trend.
Yes, there are alot of patterns at play on the intraday levels, due to flow, and technicals some are exploitable. Problem is, most people don't have proper understanding of how to assess those and they fall also into the trap of playing all the patterns all the time. Now the people/pros that are able to exploit intraday trading, generally have a good understanding of FX flow and are able to maintain good money management and have high expectancy of their trade going their way. Alot of traders get wrapped up into this thing where they want 1:2 o 1:4 risk to reward and will generally have no idea of expectancy of their trade getting into profit and arbitrarily set tp and SL just to satisfy those requirements.
Another point I wanted to address was that of bots being stupid. There are alot of different bots, bots that are generally used by institutions are good at what they are programmed to do. There is a reason why the majority of trading volume now done by banks are all algos/bots. Just to get something clear, "trading" is done by bots in the institutional space, mainly because of speed and the ability to calculate a multitude of variables simultaneously. The stock picking and investment themes are still created by humans.
Sorry for the extended post..