Bitcoin for Day Traders:
For day traders, volatile markets are generally a good place to start. Many enjoy rapid rises and falls and can thus execute many transactions in a short period of time, which can reduce holding and transaction costs.
However, especially beginners are not able to adjust their personal risk management to the volatility of the underlying asset. So if the Bitcoin is at 10,000 points, a different risk management is needed here than if the Dow Jones is at 30,000 points until further notice. Simply because the volatility is fundamentally different. Traders should therefore determine the volatility with the help of the ATR indicator, for example, and then derive the position size from this.
Last but not least, many trading strategies are built using backtesting. Since cryptocurrencies have not been around for too long, this generally lacks a large enough amount of data to distinguish patterns from coincidences.
Before we get to the forex market and why I think it currently offers even more advantages for trading, one thing first:
No matter which currency and which chart you look at, you will never have a development like with cryptocurrencies on this market. But this is not necessary at all, because exactly this circumstance offers us an advantage.
Slower price movements give us the chance to follow the market better, to assess and we never have to be afraid that the price of the currency has suddenly halved the next day. You will never experience a 70% price loss over a few days, as with Bitcoin, in the normal currency market in the most common forex pairs.
Many friends and acquaintances who have nothing to do with trading have also told me that I must already be really rich and that I am now well off thanks to the Bitcoin development. After that, the question always came up quickly whether it would be worthwhile for them to invest as well - after all, the chart only knows one direction and that is upwards at a rapid pace.
Apart from the fact that it is a warning signal for me when people who cannot stand the volatility of a DAX ETF suddenly want to invest in such things, I had good reasons to continue to focus on the Forex market.
Apart from the accumulated experience with these underlying assets, the advantages are obvious.
The Forex market is the most liquid market in the world. It is where companies, governments, central banks and private investors meet.
The G8 currencies are liquid at all times and, unlike the stock and bond markets for example, can be traded around the clock during the week.
These G8 currencies include the USD, EUR, JPY, GBP, CHF, AUD, CAD, NZD.
Due to the time differences around the globe, it is necessary that this market is open all the time so that trading is possible at any time for the above mentioned market participants.
This is made possible by the fact that currency trading takes place in interbank trading and does not require settlement through an exchange.
The second advantage of the Forex market is that the currencies traded there are recognized as official means of payment by the respective governments of the countries and I can acquire a consideration such as a product or a service for my money without any problems.
I don't have to be afraid that countries suddenly get the idea to ban my held currency, which would lead to considerable exchange rate losses. See also the rumors about a Bitcoin ban in China and South Korea.
It doesn't matter if it's a coffee or a car. The company and the consumer can calculate well with the money and companies can hedge against price fluctuations during the year in the markets.
Also, I don't get into the situation, which can definitely happen currently in the crypto market, that I get annoyed the next day when I see that I would have gotten double the goods today for the coins I spent yesterday.
Another positive point for trading on the forex market is that there are concrete economic goals for an economy, the central bank and therefore the respective currency.
For example, we know that the ECB has a target of a rate of price increase of just below 2%.
If the next inflation data from the euro area now surprise us positively, we will be one step closer to the next interest rate hike and the euro will very likely rise.
So it is possible to compile the targets of all central banks in a list to compare them with the new economic data.
It is also possible to listen to the speeches of the respective central bankers. Here they can give you information about how close you are to a possible next interest rate step or how it will go on in the euro area with the QE program, for example.
All this information will help you with the assessment