Flexibility—i.e. whether it can be used to trade stocks, Forex, futures, and other markets—is often one of the ways traders judge the overall quality of a particular trading strategy. For even if we aim to specialise in Forex, it helps to be able to dabble in other markets. This can be because Forex opportunities become scarce.
That happens to be something we Lazy Traders do quite often. It is possible to trade stocks and forex using a single methodology, just not any one, though.
This is how to test if a given method works for trading stocks and forex. Also what the three important reasons why our strategy works. With proper testing and back-end work you can someday move nimbly between any other markets you want to trade.
You have to put yourself and your strategy through the paces first. So for one, do you know what makes the strategy work? For example, is it based on established technical patterns, seasonal cycles, or known fundamental relationships? If so, technical analysis and/or fundamental methods tend to work the same regardless of the market being traded, while many seasonal cycles apply only to one or two markets.
See also: Which Chart Pattern Is Your “Bread and Butter?”
Next, can you see the strategy work for you under actual market conditions? That means demo trading the strategy in question amid current market conditions to get an idea. For example 1) How it performs, but also, 2) Whether it fits your desired trading style and personality. Only after a full quarter or more of profitable demo trading should you put real capital at risk in the markets.
Finally, you need to see your strategy holding up over time. This means being able to backtest using previous market conditions. That includes momentum investing bull and bear markets. This would also include trending and range bound conditions. So if you want to know if you can trade stocks with your strategy, don’t take someone else’s word for it. Try that strategy (and your ability to trade it) to the test yourself.
What are the most important considerations for traders wanting to trade Forex and stock? I want to make it clear that trading need not look and feel different just because you’ve switched markets. Long-term forex traders should not suddenly become intraday equity traders. Instead, everything from your strategy, to your time frame, position size, handling of risk should stay the same. So regardless of the market you’re trading, some of my foremost advice would be to prioritise the basics.
As with any trade you should always consider the risks first. Stocks like Forex are volatile. They are influenced by similar economic reports and by the emotions of other traders. Yet although there are similarities you should be cautious in reading too much in these. This is way using the steps we have outlined above will help you succeed!