A common question we get is: If RevAlerts Indicators work on charts for nearly all trading instruments, why do we only trade Forex? When we chose a market to trade, many factors came into play: liquidity, volatility, accessibility, trading hours, and more. For traders, selecting the right market is critical, as it aligns with their strategy, goals, and lifestyle. Let’s dive into a comparison of the forex market, stock market, and cryptocurrency market, followed by an explanation of why we focus primarily on forex trading today.
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FOREX MARKET
The forex (foreign exchange) market is the largest and most liquid financial market in the world, with over $6 trillion in daily trading volume. It easily dwarfs the US stock market. Forex operates 24 hours a day, five days a week, across major financial hubs like London, New York, Tokyo, and Sydney.
Pros:
Liquidity: Unparalleled liquidity ensures tight spreads and minimal slippage, even for large trades. As our strategy involves scalping, this is easily the #1 reason we love forex. We are able to get in and out of positions with ease, at the prices we expect. Critical for scalpers, and beneficial overall for any type of daytrading.
Leverage: Forex brokers often offer significant leverage, enabling traders to control larger positions with smaller capital.
24/5 Accessibility: The global nature of forex means you can trade around the clock, accommodating various schedules.
Clear Economic Drivers: Currency movements are influenced by macroeconomic data, geopolitical events, and central bank policies, providing a structured way to analyze markets. This is the least essential to technical scalpers, but we wanted to note it as it is a relevant positive.
Cons:
Leverage Risks: While leverage amplifies gains, it also magnifies losses, demanding disciplined risk management.
Complex Correlations: Currency pairs often react to interrelated factors, requiring a deep understanding of global economics. Again, probably not as relevant to technical scalpers, but a valid con to consider.
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STOCK MARKET
The stock market is a collection of exchanges where shares of publicly traded companies are bought and sold. Popular exchanges include the NYSE and NASDAQ.
Pros:
Wide Variety: Thousands of stocks to choose from across various sectors and industries. (We were thinking this sometimes actually acts as a con, as it can be overwhelming and can create analysis paralysis).
Wealth Creation: Stocks historically offer long-term growth opportunities. More relevant for investors than daytraders, but relevant nonetheless.
Transparency: Companies provide detailed financial reports, aiding fundamental analysis. Again not as relevant for technical daytraders.
Cons:
Trading Hours: Limited to exchange hours (e.g., 9:30 AM to 4:00 PM EST for U.S. markets), restricting flexibility.
High Capital Requirements: Many brokers require significant funds to trade actively.
Volatility Variability: While some stocks are highly volatile, many move sluggishly compared to forex or crypto. And even worse, dozens have super low liquidity, making them dangerous to actively daytrade.
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CRYPTOCURRENCY MARKET
Cryptocurrencies are digital assets operating on blockchain technology. Popular coins include Bitcoin, Ethereum, and altcoins. The market is decentralized and operates 24/7.
Pros:
24/7 Trading: Unlike forex and stocks, crypto markets never close, offering constant trading opportunities.
High Volatility: Price swings in crypto can be dramatic, presenting significant profit potential for traders.
Low Barrier to Entry: With fractional investing, traders can start with minimal capital.
Cons:
Extreme Volatility: While volatility can be profitable, it also increases risk, making crypto unsuitable for conservative traders.
Regulatory Uncertainty: Governments worldwide are still formulating regulations for cryptocurrencies, introducing unpredictability.
Liquidity Concerns: Smaller or newer tokens often face liquidity issues, leading to wider spreads and slippage. This is not ideal for scalpers.
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WHY WE PRIMARILY TRADE FOREX
Despite the appeal of stocks and crypto, forex stands out as the optimal market for our scalping trading strategy. Here are the key reasons:
Consistency and Predictability: Forex’s dependence on macroeconomic factors provides a level of predictability. Central bank policies, economic indicators, and geopolitical developments offer clear drivers for currency movements.
Liquidity Advantage: The forex market’s immense liquidity means tighter spreads, faster order execution, and reduced risk of slippage compared to crypto or less-traded stocks. This is absolutely critical for the type of precision required in scalping.
Risk Management: While leverage in forex is high, the market’s relative stability compared to crypto makes risk more manageable with proper trade sizing.
24-Hour Flexibility: Unlike stocks, forex allows us to trade during hours that suit our schedule, providing unmatched convenience. However, as with any good strategy, you can't really choose the time to trade. You have to allow the trade to come to you, and in forex that could mean being ready at any time of the day. Sometimes a negative.
Focus and Simplicity: Trading fewer, highly liquid currency pairs (we trade just 28 here at RevAlerts) allows us to maintain focus and refine our reversal strategy. In contrast, the sheer variety of stocks and the chaotic nature of crypto can lead to distraction.
Lower Barriers to Professional Trading: Forex trading requires less upfront capital than stock trading and provides better execution conditions compared to most crypto platforms. Here at RevAlerts, we love Oanda, and have had outstanding execution times at market rates with near-zero issues.
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FINAL THOUGHTS
Each market offers unique opportunities and challenges, and the choice ultimately depends on your trading style and goals. While stocks provide steady growth and crypto excites with volatility, forex offers the perfect blend of liquidity, predictability, and accessibility. Many traders don't realize initially just how big the forex market is.
For us, the forex market aligns seamlessly with our systematic scalping approach, providing the tools and environment needed for consistent results. Whether you’re a seasoned trader or just starting, understanding the nuances of each market can help you find your edge—and for us, that edge lives in forex.
If you have any questions on our scalping strategy, indicators, or simply want to see RevAlerts on your charts, don't hesitate to reach out.
PLEASE DON'T MISINTERPRET THE ABOVE and think we're trying to sway you into forex! We know successful traders, even within the office, who trade stocks and crypto with RevAlerts Indicators and a different strategy, with great success. Hopefully the blog post answered the question we mentioned in the first sentence.
Be alert.
Trade green.