Hi guys, hi from Andrea Unger, Forex CFDs futures stocks…
This is a question that often comes up, what shall I trade?
Well first of all obviously it’s up to individual choices, I can say the following: I would say that normally Forex and CFDs are a good choice if not a must for those who were willing to trade, don’t want to dedicate too much capital to trading.
So if they don’t have a large amount of money in their trading account, it’s nearly compulsory to use instruments such as Forex or CFDs where you can scale down your position to the level, to the small level you need to trade with a reasonable risk and not to excessive risk.
In theory, the scalability is possible also on stocks, but here the problem is that normally the commissions that you have to pay when you enter the position on the stock market are not proportional to the capital you put in that position.
So if you trade with a very small amount the cost of the operation is excessive compared to the opportunity of that operation.
I don’t know if there are brokers offering commissions in percentage of the capital you invest, I’m not aware of that really, in Italy we had one, I’m not sure if it’s still there, but in case you know something, write it in the comments and we all will be happy to be informed because it’s useful information.
The costs on Forex and CFDs are different, spread, some hidden cost, not really hidden, I mean, openly shown by your broker but sometimes neglected by the traders like swap overnight and so on, all these things have an impact, you have to evaluate everything, but obviously, generally speaking, everything is proportional to the amount of money you put in the single trade.
If money is not the problem, you can open your horizons to stock and futures.
I don’t trade Stocks anymore.
I did it in 2007 and I did that in two different ways.
One way was with the same strategies or models, I use today for the futures market, so break out or countertrend, entries intraday, overnight, depending on some models and filters to decide if to take a trade or not.
What was the problem?
Sorry, the second way I did it is with a radar screen with daily patterns to have the setups and enter on the open and eventually exit on the close long or short depending on the pattern.
I stopped that simply because I found too much correlation in the different positions because we know, I mean it’s still stock market.
I know there are sectors, or there is not the same behavior of all the stocks in different industries, but when there are major moves, you know, the markets all go up most, if not all the stocks, tend to go up and the same thing when all the markets fall.
So this risk of overexposure, having positions in correlated instruments, made me move to the futures.
On futures, I can really diversify, going from grains, to metals, to energy futures, also stock index futures and currency futures, but there is a real mix.
Also, in this case, there are correlations or inverse correlations, but obviously the level is lower and there is a much wider opportunity on diversification and therefore in risk reduction on the overall portfolio, that’s why I trade there.
I’m not promoting futures, I’m not telling you not to trade stocks, I’m not keeping you away from Forex or CFDs, I’m just telling you my point of view and the reason why I made a choice instead of another choice.
So guys again, I’m not mentioning options and all these may be in a different chapter, here we are talking about standard instruments.
If your capital is small, look at Forex and CFDs for the scalability they offer.
If the capital is not a problem, you can choose any of the 4 we mentioned, my choice is on futures because of the opportunity of diversification they offer which I don’t find or I don’t think is there in the other groups I mentioned.
As simple as that.
Obviously, I’m opened to discuss and another thing I didn’t mention here is, the stock market I see it that more as an investment opportunity, building portfolios there to beat the benchmark.
So the way to approach with algo trading the stock market for me is to build something that grows more and declines less than the benchmark which is reference index for example.
This is a totally different topic, if you’re interested in that, write it in the comments, we will develop it in the future, we can record another video for that or whatever you want to discuss, please I’m here to read your comments and I’ll be more than happy to discuss whatever you feel it would be interesting.
That’s it guys, I hope it helped, we’ll keep in touch, see you next time, ciao from Andrea Unger, ciao.
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