What markets and assets are ideally suited for day trading? While choosing the best underlying markets to trade today, we discuss the importance of price, volatility and liquidity. We help you find the best trading platform for you from forex, stocks to cryptos.
You’ll need to determine where to concentrate your resources before you start day trading in the financial markets. Thankfully, technical developments have led to the availability of a wide variety of trading instruments now. This page breaks down the major daytime trading markets, including fx, futures, options, and stock market. This will address their advantages and cons, as well as considering which is the best day trading market for novices. From lifestyle restrictions to financial targets, the knowledge will help you determine which market best fits your particular circumstances.
Stock Markets
For day traders, the stock market remains among the most common forms of online markets. Very literally, you’re buying and selling business shares.
The allure is clear, a simple trading tool and the opportunity to take advantage of some of the most successful companies in the world, from Amazon and Google to Shell and BP.
However, if you opt for day stock market trading, you’ll have to pick from a range of major indices including:
- FTSE 100 – This has one hundred of London’s largest stock-exchange-listed firms.
- Dax 30 – This blue chip stock market index consists of thirty major German companies listed on the stock exchange in Frankfurt.
- Hang-Seng – The 50 constituent companies are listed on the Hong Kong Stock Exchange and are being classified by market capitalisation.
- NASDAQ Composite – Here you can find some of the titans of technology from around the world.
- S&P 500 – This lists 500 of America’s most commonly traded stocks.
- Dow Jones Industrial Average – This index features thirty of America’s biggest and most prominent firms.
Because of its success, you can now also find a variety of online stock market trading courses and other resources, from books and PDFs to stock market forums, blogs, and live screeners.
Key Considerations
Despite plenty of opportunities and investing with market figures on your side, the big financial markets are facing stiff competition. Additionally, if you were, for example, to trade in the US, you would be forced to keep a minimum of $25,000 in your trading account.
So for beginners with minimal resources, trading on the stock market may not be the best option. Instead, you might better turn your attention to one of the various markets below.
Futures Markets
Futures is another common day-trading market. A futures contract is an arrangement between a purchaser and a seller to carry out a particular transaction at a certain date and future price.
As a day trader, you try to benefit from market fluctuations between when the purchase/sell contract is concluded and the closing of the position.
Potential contracts also concentrate on materials, ranging from precious metals like steel and aluminum to fats, foods and oils.
Futures contracts have the function of reducing unpredictability and risk. For example, if you knew you’d be selling one thousand liters of milk in a year, you would be able to sell it at the then market price. Maybe dairy-free milk will continue to rise in popularity over the next year, however, and consumer prices will decrease. The answer – agree to sell the milk at a fixed price now so you can ensure some degree of income.
Trading works in a similar manner in the financial futures market. You bet a given index will reach a certain level in the future at a certain point.
Key Considerations
Before you decide to trade the futures market, however, there are several important considerations to bear in mind:
- Capital – While less capital is needed than trading stock markets, it still suggests a few thousand dollars as minimum starting capital. Though depending on the futures contracts you want to trade, that may differ. For example, the S&P500 would require from $3,500 up to $5,000.
- Flexibility – Future business trading offers some flexibility. Official markets however change depending on the deal for the future in question. And, with your specific deal, you’ll need to ensure that you’re out of any positions before trading ends. However, premarket and post-market trades are possible in the futures market, as there is plenty of liquidity and uncertainty in trades sessions in Europe, Asia and the States.
- Narrow – Trading the game on the stock exchange offers a wide array of trading options on many stocks. Although some day traders pursue volume and uncertainty, however, many futures market trading focuses on one specific contract for the future. And if you want a varied experience, you may want to consider trading on various markets.
Generally, if you want to start trading in the markets for oil, energy and commodities, then futures can be very attractive. That said, you’ll still need a fair amount of capital and be prepared to potentially restrict your exposure to only one or two different futures contracts.
Forex Markets
In recent years, the popularity of trading the currency markets has risen considerably. Now, it is the world’s biggest market. Decide to venture into the forex room, and seek to make a profit from exchange rate price fluctuations. You will buy and sell currencies as you think they will rise in relation to other currencies, either higher or lower than others.
Both currencies are exchanged in pairs. Yet despite a variety of options, only a few possess the liquidity and other characteristics that you need to generate profits in intraday.
Key Considerations
There are some appealing features in the forex market for day trading:
- Time – No need to think about opening hours on the market or selling while the market is closed, 24/7 are the forex trading hours. It makes it perfect for those who are trying to muscle in their trading practices around other obligations, or those who can trade only on weekends.
- Minimal investment – Whereas the stock market may require tens of thousands of dollars, with as little as $100-$1000 you may become entangled in the currency markets.
- No fees – You don’t usually pay a fee for fx trading. Brokers then make their money by exchanging quotations on the market where you pay the spread.
Yet currency markets come with disadvantages:
- Trading on market uncertainty – The versatility of fx trading lures many in. The thing is, you’re still always restricted to times of high volatility and volume to earn significant income. While dependent on the pair, the best time, for example, for trading GBP/USD and EUR/USD is between 03:00 and 12:00 EST.
- Difficulty – It’s a competitive marketplace with plenty of false signals from stock trading. Beginners are also told to stick to the currency pairs GBP/USD or EUR/USD. All pledge adequate day-to-day volume and price activity.
- Leverage – Since Forex market price fluctuations are low, many traders turn to leverage to maximize profits. Although this can potentially boost takes, it can also boost loses.
Today the most open market is the Forex market. It offers low entry barriers, trade outside US business hours, plus minimum initial investment. By simply going online you will also benefit from free tactics, technicals, blogs, forums, videos and reviews.
Cryptocurrency Markets
Today’s demand for day trading is very different from just a decade ago. Crypto-traders now have a range of exchanges. Although laws, legislation, and comprehensive risk analyses have yet to be completed, there is certainly a rise in the popularity of cryptocurrency day trade.
Such internet alt-coins pledge high volatility rates and make them perfect for intraday traders. There was a time when they traded bitcoins on the dollar for pennies. Each coin today, however, is priced at thousands of dollars.
It’s not just the Bitcoin market which offers opportunities for profit to day traders. The following common digital currencies can also be used for daytime trade:
- Ethereum
- Litecoin
- Ripple
- Carando
- Stellar
- Dash
Key Things to Consider
Yet why would you start day trading in the cryptocurrency market with well-established markets such as stocks?
- Low cost – While stock trading can require thousands of dollars, with minimal capital, you can access the cryptocurrency markets. You can also get your hands on free bitcoin and litecoin. Remember, you don’t have to pay to be a network participant, which could be the case for forex and futures markets.
- Volatility – Cryptocurrency markets are developing a reputation for tremendous price swings. Profit-generating prospects are sufficient. Such variations, however, often imply an increased chance of great losses.
- Accessibility – As the scope of the market grows, so does the available tools and equipment for crypto-day traders. Head online where you’ll find video guides and a number of other educational tools to support. You also don’t have to think about opening hours or business holidays, you can trade 24/7 during the day.
- Exchange risk – Currently there is no specific concept of market risk. If your exchange goes bust however, you could lose all your money. Deposits held on exchanges are often uninsured.
- Regulation – As the world is trying to control these emerging markets, there is a possibility to fall victim to scam brokers. Not to mention unregulated markets, pumps and dumps, wash trading, plus spoofs… all can be used to exploit.
If you’re interested in technology and have a risk preference, then the markets for cryptos might be suited for you.
Options Markets
Many exchanges now offer options-market trading. A straightforward financial derivative is an option. The contract gives you the right to buy or sell an asset during or within a specified date (the date of exercise). You as the seller have a legal duty to comply with the terms of the contract. Usually it would be either to sell or purchase, or if the buyer wants to ‘exercise’ the option before the expiry date.
The benefit of trading options is that you don’t have to buy the underlying asset which, for example, can sometimes be much more costly than a stock.
Types
While having a reputation as a risky instrument, only two key classes of options exist:
- Put – The sell option lets you sell at a particular amount.
- Call – The buy option lets you purchase at a certain price.
On top of that, there’s a long list of different domestic, regional, and emerging markets in which you can exchange options, but not all are ideal for day trading. Including:
- Stock options
- Index option
- Mini options
- Mini Index options
- Options on futures
- Weekly SPY options
- OEX options
- ETF options
- S&P 500 options
- Crude oil options
Binary Options
Another area of interest comes in the form of binary options. Your task is to determine whether at any stage the underlying asset should end up above or below a given price.
Today, these basic derivatives can be traded on nearly any instrument or market. For example, binary options can be traded on commodity prices like crude oil and aluminium. Alternatively you can get binary options on Twitter, Tesla, and BP if you want to take a stand on world-famous stocks. In the binary options tab, both forex markets and cryptocurrencies are present.
They appeal because they are all or nothing trade. You know how much you’re going to win or lose before you put the deal. So, if you want a clear market and instrument, plus access to minimally capital-intensive global stocks, then binary options could be worth exploring.
CFD Markets
Although less known in the area of trading markets, Contracts For Difference (CFDs) are an interesting proposition.
A CFD allows you to buy and sell on a specific instrument’s rise and fall. The actual difference contract is the position where you entered into and exited a deal. This derivative product is based on an underlying asset and the contract is with your broker.
Yet with so many trading markets and financial instruments available at home and abroad, why do CFDs merit your attention?
- Diversity – With CFD investment there are more than 10,000 options to choose from, including currencies and commodities. Moreover, it is a growing industry, which will increase the diversity of the sector.
- Leverage – It could help you capitalize on opportunities and raise profits. There is also the possibility of increased losses, however, so care should be taken when using leverage.
- Flexibility – CFDs are mostly without an expiry date, premium, or commission (depending on the broker). However, on the downside, you are always going to pay a bigger bid/ask spread than in the physical market.
Choosing A reviewbrokers.online Market
Day trading the markets is no easy task and full-time job, despite providing direct exposure to many markets thanks to the internet. The problem is, there are significant differences in market structure, price and characteristics. So, the market you select will depend on your particular circumstances, from financial capital and risk tolerance to business awareness and availability.
There are also a number of significant considerations to keep in mind when making a trade market decision. These are:
Volatility
It is important to trade a volatile market. Volatility is a meausre of how much price changes over a given time span. The more the price fluctuates, the greater the potential for you to take advantage of intraday moves.
Liquidity
Liquidity deals with the ability to purchase and sell an item without impacting price levels. High liquidity markets mean you can trade with ease, several times a day.
Market Resources
If you don’t have a clear understanding of your business, then you need to consider the resource availability. Where can you go for price alerts and gauge business sentiment concerning daytime trading?
Is trading data easy to access online? If not, then it’s worth seeing what your broker can do, because, for example, trading volume charts can also be useful.
Also, does the market on which you are involved have a variety of day-trading news outlets that you can refer to? Let’s say you’re interested in metals – does your broker have a newsfeed for the gold trading market that will clarify significant daily moves?
Narrow Your Focus
Another common mistake some individuals make is to simultaneously try their hand at many different markets. Each market has its own nuances and complexities which demand considerable attention. So, you will focus on and master a single sector. If you can produce consistent income and want to pursue other markets, then you can do that.
So, don’t just start trading overseas markets at random. Over the long run, a deliberate and measured decision would favor you.
Demo Account
Whichever market you choose, start day trading first with a trial account. It helps you to get some important practice before putting real money on the table. You will get into analytics, conduct bearish markets trading, choppy markets and know all the basics. It is also an easy way for a broker to get test driven by the client.
Algorithm Capabilities
Also, you may want to know how you can use automated algorithmic trading to maximize market efficiency and capitalize on volatility. A strategy which is often successful can also be programmed into an automated trading network.
Such algorithms can be used to transact diverse markets, with internal business and market cycle capitalization. You simply enter your parameters and then let the heavy lifting be done by your trading bot.
Final Word
Most of the best day trading markets are broken down above. Because, you see, you have a wide range to choose from. This means that if one of these markets is not able to produce profits, you can always seek another.
Nonetheless, consider your financial situation, industry experience, availability and risk perception before making a decision. This will help you assess which of the above markets will better match you. Using the variety of available online market trading guides, tools and websites – your overall performance will receive a boost.
