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Trading Indices VS Forex

The document compares and contrasts trading indices versus forex. Indices trading focuses on tracking the performance of groups of stocks, while forex trading looks at currency exchange rates. Indices have higher volatility, making them suitable for day and short term trading, whereas forex has lower volatility and is better for long term trading. Forex also provides higher leverage with smaller account sizes. The document also defines synthetic indices as simulated markets with randomly generated prices that are unaffected by natural disasters. There are different categories of synthetic indices for traders.

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Bevon
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190 views4 pages

Trading Indices VS Forex

The document compares and contrasts trading indices versus forex. Indices trading focuses on tracking the performance of groups of stocks, while forex trading looks at currency exchange rates. Indices have higher volatility, making them suitable for day and short term trading, whereas forex has lower volatility and is better for long term trading. Forex also provides higher leverage with smaller account sizes. The document also defines synthetic indices as simulated markets with randomly generated prices that are unaffected by natural disasters. There are different categories of synthetic indices for traders.

Uploaded by

Bevon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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TRADING INDICES VS FOREX

The index and forex market are both very liquid, made popular by the
variety of methods traders use to get exposure.

DIFFERENCES BETWEEN INDICES & FOREX TRADING


INDICES TRADING FOREX TRADING
1. Trading indices focuses on Forex trading looks at the exchange value of buying
tracking the performance of a one currency and selling another.
group of stocks.

2. When trading indices, you’d Forex trading, you buy & sell a currency on the
take a position on a group of foreign exchange market with the hopes that will
stocks or sector’s price level appreciate or depreciate. (British pound against US
rising or falling without taking dollar GBP/USD), Euro against US dollar EUR/USD
ownership of the asset or US dollar against Japanese Yes USD/JPY).

3. Has high volatility, such that Has low volatility, therefore needs a long term trader
you can make a profit as a day
and short term trader
4. Indices are between forex and Forex has the higher leverage provided, meaning that
stocks. They have usually a you need a smaller account to trade. It’s a good
good compromise between option if you have limited resources.
available leverage and account
size.

Synthetic Indices
Definition

Synthetic indices are the simulated markets that work like real markets. But
the price numbers are generated randomly by a fully secured computer
program. This program is handled by fully independent third-party
companies.
These indices are programmed in such a way that natural disasters do not
affect the working of indices. There are many advantages of these indices
over the other forex currency pairs. That’s why retail traders like to trade
such types of indices.

Categories of Synthetic indices

There are five major categories of synthetic indices and they are further
classified into different types depending on their characteristics.

I. Volatility indices
II. Crash/Boom indices
III. Jump indices
IV. Range Break indices

VOLATILITY/JUMP RECCOMMENDED LOT SIZE


INDICES

Volatility 10 5

Volatility 10 (1s) 0.25

Jump 10 1.5 (More than one hour time frame)

Volatility 25

Volatility 25(1s) 0.025


Jump 25

Volatility 50 10

Volatility 50(1s) 0.05

Jump 50 10

Volatility 75 0.25

Volatility 75(1s) 0.5

Jump 75 0.025 (especially on 4hr.& 1 day time frame)

Volatility 100 2.5 (to be reviewed)

Volatility 100(1s)

Jump 100

Volatility 150(1s)

Volatility 250(1s)

IMPORTANT NOTES
 Use 30 Mins, 1 Hr., 4 Hr., 1 Day time frame.
 Avoid volatility 75 at all cost.
 Study the pattern at least for 30 seconds.
 3 candlesticks following each other, either bearish or bullish.
 Never reverse trade.
 One trade at a time; avoid scalping.

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