Advantages of Indices over Market

What are some good things about trading Stock Indices instead of currencies? Here are some reasons why trading Indices can be better than Stocks.

Indices have better trends than currencies

The indices market moves are based on stock market price moves. Stock price moves tend to move in 1 given direction. In times of economic growth prices of stocks increase constantly meaning the indices that track the prices of these stocks will also continue moving upward and maintain an upwards trend. While in currency market moves may not be well pronounced as the market moves in stock indices.

Indices have less consolidations and market whipsaws

Currencies often stall for long stretches. This leads to many false moves. Stock indices don't do that much. They pick a clear path, up or down, most times. So trading indices cuts down on false signals. Fewer false moves mean better chances to make money.

Indices move more points per day than currencies

Stock averages will usually move around 500 to 2,000 points each day: compare this with currencies, which typically move only 50 to 100 points daily.

In stock indices, one point move equals $0.1. That's not $10 like in forex. Profits per pip stay small. This lets traders handle money better since moves cost less. Yet indices often shift 500 to 2000 points on average. Traders still earn well with $0.1 per point.

Lower Margin per Lot Requirement

Depending on the stock index being traded, the margin requirement for one lot ranges from $5 to $250. The margin needed for one lot in forex is $1,000. As a result, trading indexes requires less capital than FX trading.

Indices are More Predictable

For stock indices, their market heads are purely based on stock price moves, if stock prices move higher stock indices also move higher, if stock prices move lower stock indices also move lower. This makes the indices more predictable than currencies.

Indices are Less Complex and More Localized and Less Global

A stock index watches shares in one exchange and sticks to a few top big firms. This cuts down the hard work for any index. Take the German DAX. It follows just 30 top picks from the Frankfurt stock spot. So a trader eyes only those 30 firms there. Forex works different. Currencies span the globe. Pairs mean trades link two sides. Traders must watch world views and two nations' news, even for one pair.

Furthermore, bear in mind that a single currency is traded internationally by countless individuals, meaning supply and demand are dictated purely by speculation. To achieve success in Forex, one must master the skill of accurately assessing this supply and demand dynamic to become profitable. This contrasts with indices, where trend direction is governed by the movements of their underlying stock prices. Profitability in indices trading simply requires tracking the stock prices used in the index calculation - a relatively easy task, as stock prices generally trend upwards. This is because when economies thrive, investment in stocks increases, pushing prices higher, and indices typically track established, highly regarded corporations (blue chips), whose shares consistently appreciate. Therefore, stock market indices offer an advantage as they necessitate less in-depth analysis compared to the Forex market.

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