Who trades currency and stock indexes?

Every day investors trade currency and stock indexes looking to make a higher return on investment and to take advantage of the opportunity of making money as markets rise and fall.

Banks and financial institutions also trade currency and index markets for exactly the same reasons, however in some cases they are using them to hedge stock market positions they have. For example if they have a portfolio of stocks they have bought and the overall stock market is dropping the value of the shares will be falling but they can take a “short” position on a Stock Index such as the ASX 200 and profit from the overall stock market falling.

When to trade the currency and index markets?

The currency market is a 24 hour a day market meaning we can take positions in the most liquid market in the world 24 hours a day. There are three traditional trading session, the Asian, European and US trading sessions and it is the European trading session that sees over 40% of the 5 trillion dollars traded in the currency market.

We have a dedicated online currency trading room that allow you to log in and listen and learn from our professional team as they explain the trade sets up. Our Currency Trading Room opens at 7pm AEST Monday to Friday which is shortly after the European financial markets open.

Here at LTG GoldRock, we also trade the ASX 200 Stock Index from 10am to 4pm each day however 90% of our trades are completed between 10.00am and 10.30am AEST. We also trade the Japanese Nikkei 225 Stock Market Index as it’s ideal for our Australian day light hours.

We also trade other global indices such as the US Dow Jones, German DAX and UK’s FTSE 100. With all our positions we are generally in and out of the market intraday meaning there is no risk holding any trades overnight or weekends.

Why trade the currency and index markets?

There are a number of reasons why an investor might trade these two markets but the main reason is simplicity and profit opportunity. The simple decision we make is whether or not the the currency or stock index market is about to rise or fall. We are not stuck having to decide what stocks to buy or sell and which sectors of the market to invest in.

What are index markets?

An Index is simply a group of stocks. The ASX 200 is simply 200 companies in Australia listed on the ASX 200 that are ranked highest by market capitalisation, which is the stock price times the number of stocks on offer. For a stock to be considered part of the overall ASX 200 Stock Index its share price times the number of shares it offers must be amongst the top 200 companies valued using the same criteria. Brokers offer traders and investors the opportunity to buy and sell stock market indexes allowing them to profit from the share index if it rise or falls.

Where and how?

You are able to trade the currency and stock index market from anywhere you have internet access, all you need is a trading account which will be linked to an electronic trading platform on your computer, phone or tablet device.

Get in touch with us today and let’s start transforming your business from the ground up.

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24 Hour a Day Trading

Unlike other markets the Forex market trades 24 hours per day meaning you do not have to wait for the market to open each day, you can trade whatever currency you like whenever you like 24 hours per day Monday to Friday. The trading platforms open at around 7am AEST on Monday morning and stay open until the following Saturday at 7am.

Huge Liquidity

The Forex market trades 5 trillion dollars per day.
In any given 24 hour period the currency market trades over 5 trillion dollars per day making it the most liquid market in the world. With so many buyers and sellers in a 24-hour period this means that at any moment with a click of a button you can enter the currency market at the price you want to enter. You can enter at the market price or place a pending order to trigger you into the market at a given price. You don’t even need to be around your computer, the trading platform can take care of the entry order for you.

No commissions, no additional fees such as exchange fees or clearing fees

The way in which brokers make their money in the currency market is by setting a bid or ask spread. When you enter your trade you will select a volume per tick that you want to trade and the broker will offer you a spread to overcome before you can begin to make money. For example if you trade with a volume of $0.50c per tick the spread being offered may be 2, meaning you will be filled 2 ticks away from the market price and once price has gone two ticks beyond your filled entry you will begin to make money. In this example the broker would make $1. Traders enjoy the currency market because the spread they pay is incremental to the amount of money per tick they trade.

Start out small

In the currency market you can open a trading account with as little as $100 and begin trading with as little as 0.01 volume, which is approximately 10c if trading an Aussie Dollar position with an Aussie Dollar account. This means the barrier to entry is extremely low and you can begin to learn how to deal with the emotional elements of trading real money with small volume sizes.

Low levels of market manipulation

Due to the sheer size of the currency market it is not possible for one trader to corner the currency market and consistently manipulate price to their advantage.

Managing Risk

With 5 trillion dollars in liquidity exiting a position at a desired level and managing risk is critical. The currency market has so many buyers and sellers it gives traders a higher degree of certainty that they will be filled at the exit price they desire. Whilst gaps can occur they are far less common in the currency market due to the liquidity.

Making money both ways

The currency market gives you the opportunity to profit when currencies rise and fall, making it a 100% recession proof investment opportunity. You must obviously get the direction correct however you do not pay anymore money when speculating that a currency may fall and you do not pay for stop loss orders. It is highly recommended that a stop loss be placed immediately an order is accepted into the currency market. This can also be done automatically by the trading platform.

The simplest way to answer Why Trade Indexes is to understand what trading an index really is. An index is a group of stocks put together to make up one item such as the ASX 200, which is a group of 200 stocks listed on the Australian Stock Exchange. Other indexes you may have heard of are the Dow Jones, which is a US index with 30 stocks or another US Index called the S&P 500, which is obviously 500 stocks. In the UK they have an Index called the FTSE 100.

One of the challenges investors face when buying a portfolio of stocks is which stock to buy. Then of course there is the decision of when to sell them. Having to make multiple decisions often leads to confusion and this can often lead to making poor investment decisions. Give someone a ball and ask them to toss it in the air and they’ll catch it 95% of the time. Give them 2 or more balls and they’ll likely drop both.

But imagine instead of having to make the decision of what stocks to buy or sell you only had to make one decision. Is the overall direction of the stock market going up or down? You only need to pick the direction correctly and you can even make money with indexes when the stock market goes down. For example, if you think the index is going up today then you buy a position at the opening of the market and you can sell it at any time in the future, today, tomorrow, next week or next month.

The world’s greatest investor Warren Buffet was asked what his top recommendation was for a new investors. His reply. “Over time you’ll do much better buying the Index rather than trying to trade the stocks within it.”