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Singapore
Experience: None
Platform: MetaTrader 4
Trading: Spot Forex
Posts: 66 since Dec 2018
Thanks Given: 3
Thanks Received: 58
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The spread to ATR ratio.
how to see if an instrument is good for day trading, swing trading or position trading / investing.
forex is good for day trading / swing trading as the spreads are low relative to the ATR, say for example, EURUSD.
EURUSD in most retail brokers range from 0.7 to 1.5 spreads + commissions total. and recently the ATR has been around 40 to 80pips. meaning the spread to ATR ratio around 26 to 114, just some extremely rough estimates.
however, for crypto, the actual crypto being traded on exchanges have alot of viability but trading it as a CFD day trading it, is in fact really bad. since the spread being paid is alot compared to the ATR. maybe a factor of 5 to 10.
plus modes of executions matter alot. for example, deribit and bitmex allow for liquidity provision rebates, if you put limit orders, implying that you get the edge for making a market. whereas for CFD you pay an edge no matter what, implying that commissions and spreads and exchange structures will significantly affect trading performance and strategy type.
for example HFT types are better off in exchanges which provide a liquidity rebates whereas for forex, 1 may be as good as the other since the relative advantage is so small plus the spread to ATR ratio is robust enough that not much edge is given away.
otherwise position trades may be more viable if these factors like spread and commissions are much of a factor and you want to reduce these as these are friction on your p&l.
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