Short-Term Trading – Forex v Shares
The financial markets are extremely volatile at the moment, and as a result many traders are focusing on short-term trading as opposed to longer term investing. However is forex trading or share trading more profitable when trading on an intraday basis?
I personally trade both the major currency pairs and individual UK shares and in my experience if you’re short-term trading then forex trading is generally the more profitable. There are several reasons for this. One of which is that the movements of the major currencies are generally more predictable because they conform extremely well to technical analysis.
The advantage you have when trading forex is that all the major economic announcements are scheduled and therefore known in advance. This is important because these economic data releases can have a major impact on currency prices and can potentially distort any technical analysis you do. So because you know when these announcements are due you can ensure that you don’t have any positions open when the announcements are made, and can therefore focus entirely on technical analysis without any external influences ruining your analysis.
When you trade shares, however, there is always the possibility that an unexpected news announcement will be made relating to the company you are trading. Most announcements such as trading updates and final results are known in advance but there are always announcements that can come completely out of the blue such as news about a new contract win, a takeover approach, or a profits warning, for example. These can cause the share price to rise or fall dramatically in a matter of seconds or minutes and can render technical analysis completely useless.
So it’s hard to be completely confident about trading shares when there is the possibility that market-moving news could come out at any time. Furthermore another problem you have with individual shares is that they do not always conform that well to technical analysis. Sometimes it’s the case that despite what the charts are telling you about a share, the share price will follow the wider market anyway.
Finally if you’re trading on an intraday basis, you will find that when trading shares there may be days when the share you are trading simply doesn’t move enough in order to make any worthwhile profits from trading. This is never the case with forex trading because if you just stick to the major pairs, you are pretty much guaranteed volatility, with plenty of points movement every single day.
So overall I personally think that forex trading is so much more profitable than share trading when trading on a short-term basis.