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miketoll

Why the Stock Market is the Easiest Market to Trade

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Hello,

 

I want to discuss why stocks are easier to trade than forex or other derivates. Please spare me with pseudo-forex-advantages like 24h market (no one trades 24 hours; beside that the market is volatile only in certain times), smaller trading universe (actually I prefer a lot of charts...), bigger market (who cares?), smaller fees (every looked at the commissions of IB?) and liquidity (look at apple, google and co. here you have more liquidity you can dream off...).

 

I claim that stock markets are easier to trade for following reasons:

 

1. The market has a general upwards drift. You could buy-hold and eventually will turn a profit. Not so in forex or other derivates (e.g. see indices worldwide over the past 50 years - that's not a coincidence) - Anyone knows why???

 

2. It's not a zero-sum game in the sense that someone has to loose, whenever I turn a profit. Naturally this means that there's less competition. It's a universal truth, that less competition means more profit potential. The consequence: There's a higher possibility for the constitution of a situation where everyone has the same interest, making it easier to trade the market.

 

3. Being a smaller entity a company is much easier to analyze compared to an entire country. What's even more important is that people find a consensus much easier about the fundamental strength of a company (which affects the stock price). For example, take the EUR/USD. Good news from the EU and good news from the states. It's in the trader's perception which news is better, ultimately influencing the price. However, good news (or outlook, if longterm) for companies can be interpretet only in one way. Right, good for company; ... which equals good for the stock (in the long term).

 

I think what it comes down to, is that in stock markets there's a stronger consensus about what's good for a company and what's bad for a company (a company is easier to analyze in a whole, there're more information and so on...). This makes stocks more predictable in comparison to commodities, forex or futures... (being a non zero-sum game there isn't a conflict in interest as well; thus everyone can profit). This is the reason, why stock markets are easier to trade. If you disagree or feel to comment I encourage you to do so.

 

-mike

Edited by miketoll

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Hello,

 

I want to discuss why stocks are easier to trade than forex or other derivates. Please spare me with pseudo-forex-advantages like 24h market (no one trades 24 hours; beside that the market is volatile only in certain times), smaller trading universe (actually I prefer a lot of charts...), bigger market (who cares?), smaller fees (every looked at the commissions of IB?) and liquidity (look at apple, google and co. here you have more liquidity you can dream off...).

 

I claim that stock markets are easier to trade for following reasons:

 

1. The market has a general upwards drift. You could buy-hold and eventually will turn a profit. Not so in forex or other derivates (e.g. see indices worldwide over the past 50 years - that's not a coincidence) - Anyone knows why???

 

2. It's not a zero-sum game in the sense that someone has to loose, whenever I turn a profit. Naturally this means that there's less competition. It's a universal truth, that less competition means more profit potential. The consequence: There's a higher possibility for the constitution of a situation where everyone has the same interest, making it easier to trade the market.

 

3. Being a smaller entity a company is much easier to analyze compared to an entire country. What's even more important is that people find a consensus much easier about the fundamental strength of a company (which affects the stock price). For example, take the EUR/USD. Good news from the EU and good news from the states. It's in the trader's perception which news is better, ultimately influencing the price. However, good news (or outlook, if longterm) for companies can be interpretet only in one way. Right, good for company; ... which equals good for the stock (in the long term).

 

This is the reason, why stock markets are easier to trade. If you disagree or feel to comment I encourage you to do so.

 

-mike

 

 

I agree with small amendments :):

 

1. so you're only buying?

 

2. company information most of the time tends to be irrelevant in front of macro data: NFP, QE's, etc..........company information IS relevant when market is stable......so who decides what information is more important? When financial crises started and all shares went down, was it because of the fact that companies all of a sudden over night were not in better shape anymore? No, it was macroeconomics.

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I agree with small amendments :):

 

1. so you're only buying?

 

2. company information most of the time tends to be irrelevant in front of macro data: NFP, QE's, etc..........company information IS relevant when market is stable......so who decides what information is more important? When financial crises started and all shares went down, was it because of the fact that companies all of a sudden over night were not in better shape anymore? No, it was macroeconomics.

 

1. Of course, selling can drive prices lower. However, it's not about if prices can be pressed lower, but if there's a situation where everyone could POTENTIALLY win (which is in stocks, but not in derivates). As I said it's about a conflict of interests which makes trading difficult.

 

2. True! But my point was about stocks being more predictable compared to other markets. Looking back in history times of crises are so short compared to the times where the market is stable (2 times in last 20 years). And as you said, company information IS relevant when the market is stable making stocks predictable. Although crises may be more intense in terms of price fluctuations, this is not too difficult to manage with good risk-control. What I want to say is, that stocks are much easier to predict in times of macro stability. Forex, however, or every other zero-sum game is very hard to predict (for the reasons stated in my first post), if not unpredictable.

Edited by miketoll

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Hello,

 

I want to discuss why stocks are easier to trade than forex or other derivates. Please spare me with pseudo-forex-advantages like 24h market (no one trades 24 hours; beside that the market is volatile only in certain times), smaller trading universe (actually I prefer a lot of charts...), bigger market (who cares?), smaller fees (every looked at the commissions of IB?) and liquidity (look at apple, google and co. here you have more liquidity you can dream off...).

 

I claim that stock markets are easier to trade for following reasons:

 

1. The market has a general upwards drift. You could buy-hold and eventually will turn a profit. Not so in forex or other derivates (e.g. see indices worldwide over the past 50 years - that's not a coincidence) - Anyone knows why???

 

2. It's not a zero-sum game in the sense that someone has to loose, whenever I turn a profit. Naturally this means that there's less competition. It's a universal truth, that less competition means more profit potential. The consequence: There's a higher possibility for the constitution of a situation where everyone has the same interest, making it easier to trade the market.

 

3. Being a smaller entity a company is much easier to analyze compared to an entire country. What's even more important is that people find a consensus much easier about the fundamental strength of a company (which affects the stock price). For example, take the EUR/USD. Good news from the EU and good news from the states. It's in the trader's perception which news is better, ultimately influencing the price. However, good news (or outlook, if longterm) for companies can be interpretet only in one way. Right, good for company; ... which equals good for the stock (in the long term).

 

I think what it comes down to, is that in stock markets there's a stronger consensus about what's good for a company and what's bad for a company (a company is easier to analyze in a whole, there're more information and so on...). This makes stocks more predictable in comparison to commodities, forex or futures... (being a non zero-sum game there isn't a conflict in interest as well; thus everyone can profit). This is the reason, why stock markets are easier to trade. If you disagree or feel to comment I encourage you to do so.

 

-mike

 

 

Trading stock market is much easy cause company's performance is far more easier to predict than any currency ...

 

Also company's stocks are far more easier to value as being under-valued or over-valued..

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Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I am getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis.

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Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I am getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis.

 

Thats a nice setup for a technical traders.

 

I dont use stops though in my position trading on long side...My only stops are when im short...

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Well, i can name a lot of forex advantages. For example, forex has higher leverage comparing to stocks, which gives a chance for traders with small accounts to earn money. Also in forex you don't have to buy something before selling it! Currency is the good already.

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