Advantages of Index over FX Market - Index vs FX Trading

Indices beat currencies in some ways. Here are perks of index trades over stocks.

Index have better trends than currencies

The Indices market's changes depend on how the Index market's prices change. Stock prices usually move in a certain direction. When the economy is doing well, the prices of stocks go up regularly, which means the Index that follows these prices will keep rising and show a positive trend. In the Forex currency market, the movements might not be as noticeable since the Index guides how the market shifts.

Index have less consolidations & market whipsaws

Unlike forex currencies that can consolidate for long periods of time and thus producing many whipsaws, market indices rarely consolidate for long periods of time, Indices will show a given trend direction at any one specified moment - either upwards or downward. This means there will be less fake out generated when trading Index and every trader knows that less whipsaws equals better odds of making profits.

Index move more points per day than currencies

Stocks typically move around 500 to 2,000 points daily, while FX currencies generally experience daily movements within 50 to 100 points.

One key benefit is that a 1-point index shift equals $0.10. This differs from forex, where it equals $10. So, profits per pip in index trading stay smaller. This lets traders manage their money better in stock indices. The smallest price change per pip remains low. Yet, index moves often hit 500 to 2000 points on average. Traders still earn solid profits, even with $0.10 per pip.

Lower Margin per Lot Requirement

The margin needed for indices ranges from $5 to $250 per lot, depending on the indices being traded. The margin requirement in FX is $1,000 per lot. Consequently, trading indexes requires less capital than FX trading.

Indices are More Predictable

Index markets follow price changes directly. When prices rise, indices rise too. When prices fall, indices fall. This setup makes indices easier to predict than Forex pairs.

Index are Less Complex & More Localized and Less Global

The fact that a Stock Indices monitors stocks within a single Index exchange market & in additional only tracks a limited number of top blue chip companies really reduces the complexity of a particular index. For exemplification the Germany DAX only tracks the best 30 companies in Germany Frankfurt Stocks Market - meaning a trader following this index can concentrate their focus & concentrate on keeping track of only 30 companies within the Frankfurt Bourse. Where as in Forex Currencies is more global and the fact that Forex currencies are traded in symbols therefore a trader has to keep their outlook on a more global focus & also keep track of developments in two economies even if the only trade one Forex currencies.

Also consider the fact that one currency is being traded by many traders all over the globe and the supply & demand is determined by pure speculation - & to be good in Forex you have to learn how to accurately gauge this demand supply to become profitable, unlike Indices where the trends are determined by their respective Index price moves - & to be profitable you only need to follow prices that are used to calculate a particular index - something that is easy to do; because Indices prices always move up, secondly when economies are performing well, people keep investing in stocks & prices keep going up, thirdly, indices track blue chip companies, blue chip stocks in any market always go up. Therefore, market indices have an advantage over Forex as they require less analysis than the Forex market.

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