If you’ve been successful trading stocks and now wish to try your hand in the Forex market, please read this article before you lose the shirt on your back. While it may be tempting to think that both markets are similar, in reality they are worlds apart.
I personally know a successful stock trader who had lost more than $150,000 in the Forex market before he admitted to himself that he didn’t know what he was doing. Don’t be like this person. In this article, I will discuss 2 of the main differences between the Forex and stock markets so you can adjust your trading patterns accordingly.
Difference #1: Trading hours
This might seem obvious to you, but you’d be surprised at the number of people who trade Forex at the wrong time of the day!
Sure, most people know that the Forex market is open 24 hours… but what they don’t know is that not every single one of those 24 hours is a favourable time to trade.
Generally, the best times to trade in the Forex market are times when liquidity is high. These are typically times during the U.S. and London market trading hours. All other trading time periods have relatively lower liquidity and can be a bad time to enter into trades.
Difference #2: Volatility
In the stock market, high volatility usually means that the price of a stock is either skyrocketing, or plunging down rapidly. Stock prices rarely fluctuate up and down in big swings.
In the Forex market however, high volatility usually means large up and down price swings. Now, I know how some people will say “but you can still profit from price swings, right?” While one can technically trade price swings, this involves a high level of expertise to accomplish. Unless you’re an expert trader or institutional trader, trading price swings is a highly risky activity. I always recommend trading with the trend instead.
Therefore, keep in mind that volatility in the stock and Forex markets often mean different things. Adjust your trades accordingly and you’ll see immediately see improvements in your trading results.
To learn more, download my free 26-page guide here:
"Forex Trading Traps!"
Harold Hsu is the owner of
www.ForexSystemProfits.com where he provides premium Forex trading tips and resources.
