Forex – A Note on Price Differences and Variability – Information from a Forex Trader in Singapore

For those people who have already traded in other markets, you probably know about price gaps. Gaps occur when prices "jump" from one price level to another without taking additional steps to get there. For example, you might trade a stock that closes at $ 10 at the end of today, but because of some event that happens overnight; it opens at $ 5 tomorrow and continues to decline throughout the day.

Gaps create another level of uncertainty that can interfere with the trader's strategy. Probably one of the most troubling aspects of this is when a trader uses stop losses. In this case, if a trader puts a stop loss at $ 9 because he no longer wants to be trading, if the stock price reaches $ 9, his trade will remain open overnight and the trader will wake up tomorrow at a loss, much of what he can do were prepared for.

After looking at several forex charts, you will find that there are little or no price gaps, especially in longer term charts such as 3 hour, 4 hour or daily charts.

Forex: Note on volatility:

Trading opportunities exist when prices fluctuate. If you buy a share for $ 2 and it stays there, there is no chance of winning. The magnitude of the level of this oscillation and its frequency are called volatility.

As a trader, you gain from instability. Large volume transactions and high liquidity combined with fewer trading instruments generate more volatility during the day in the forex market, which can be used by everyday traders. The high volatility in the foreign exchange market indicates that a trader can potentially make 5 times more money by trading in a currency than trading in the most liquid stocks.

Instability is a measure of maximum return that a trader can generate with a perfect forecast. The volatility of the most liquid stocks is between 60 and 100. The volatility in currency trading is 500. (Source: Oanda). In this regard, currencies make a better trading medium for day traders than stock markets.