FOREX FOCUS
A Forex Focus Comparison
Looking At Other Markets
Most new traders gravitate to the S&P mini because of its average price range. But here’s a look at daily price movement in the currency futures vs. that of the S&P 500. Which one has larger price movements?
Many new traders begin their trading experience on the mini indexes, with a primary focus on the mini Standard & Poor’s 500, as either a scalping trader or an intraday trader. Their daily profit target is normally between three to five points (at $50 per point). Sounds reasonable, right? Wrong!
For an experienced scalping trader, this could be done, but not very likely for a new trader. To understand why, we need to look at the daily movement of the mini S&P. For October 2009, the mini S&P moved 19.27 points per day on average. Therefore, if the objective is to capture five points a day, a new trader is trying to capture 26% of the daily movement, which is quite hard for someone new to trading. Now, let’s take this a step further and look at the individual daily movement.
FIGURE 1: DAILY PRICE MOVEMENTS IN THE MINI S&P. In October 2009, out of 22 trading days, there were only two days the S&P moved more than 30 points and 12 days that the mini S&P moved less than 20 points.
Measuring daily movement
As you can see from Figure 1, in October, out of 22 days, there were only two days in which the S&P moved more than 30 points and 12 days that the mini S&P moved less than 20 points, making it even harder to capture the daily profit goal of five points.(When the mini S&P moves more than 30 points, the five-point daily goal is only 16% of the daily range, making it easier to capture the daily goal, provided the movement is after 9:30 am ET.)
Now, let’s take a look at just one of the currency futures — the Australian dollar (AD). (The Australian dollar has a point value of $10 per point; each price increment is considered a point.) The AD moves on average of 142.09 points per day (the equivalent of 28.42 mini S&P points). Using the same goal of five mini S&P points per day, the new trader is only trying to capture 17.5% of the daily movement.