Which Markets Are Best For Day Traders

When it comes to available markets for day trading, there are many options to choose from. I’m often asked which markets are best for day traders, and the answer to that question is a difficult one, because many different markets offer many different opportunities for a day trader. Today’s biggest markets are probably stocks, futures and Forex, but each has advantages and disadvantages for new traders. Some of the largest world wide volume is found in the Forex market, but that market is not regulated nearly as well as stocks and futures, and trading them has some real disadvantages in my personal opinion.

I actually like to trade currencies on occasion, but when I do so, I trade them via the futures market and not through the Forex market for this very reason. Day trading stocks has some disadvantages in that there are certain rules that you must follow that place the small trader at a disadvantage. There are special requirements when shorting stocks you don’t own, and even more importantly, you need a minimum account of $25,000.00 US in order to meet the day trader account minimums. You also have to watch or scan many different stocks in order to find the best ones to trade each day as well, so this can be complicated and confusing for newer traders.

My market of choice is trading futures, and my favorite is the Mini S&P (ES). You can go long or short with ease when trading futures and you can start with a much smaller trading account. U.S. futures are well regulated too, so you don’t have some of the problems you find when trading Forex markets. All of the mini futures indexes are good choices, but there are several reasons I prefer to trade the ES market. When it comes to futures, you can trade several different grains, meats, financial instruments and even commodities such as sugar, cocoa and coffee. There is a multitude of choices that can and will fit any trader’s needs.

As stated previously though, I recommend and suggest the mini index futures for day traders. The Mini S&P or ES is one of the most liquid markets available, so there is almost no slippage when trading regular market hours. You may find some minor slippage in the after hours trading, but even then, it will be very limited unless you are trading institutional size lots. The lack of slippage alone makes it a very attractive day trading market, but there are also other nice advantages. Each tick in the ES is worth $12.50 US, and with it now being relatively easy for even small traders to get a round turn commission for under $5.00 US, this makes it a great market for scalping. You can actually make money in the ES with only a single tick of profit if you have a good broker who offers these competitive commission rates. There are not many markets where you can actually scalp a single tick and make money. Just a few short years ago, you had to make several hundred dollars on a single trade just to cover commissions, so the ability for small traders to profit is now better than ever!

You can also trade the ES with very small margins if you are a day trader and exit by the close at 3:15 PM CST each day. There are many brokers that will offer you day trading margins of $400 to $500 US per contract in the ES. Compare that to the amount of margin needed to trade a single stock and you will quickly see that the ES futures offer an excellent opportunity for leveraging your profit opportunities while allowing you to do it with very small commission costs. When you factor in liquidity, margins and commissions costs, the ES is on par with the best markets in the world, and that’s one reason it brings in so many players.

The one disadvantage, which will actually be big advantage if you learn to profitably trade the ES, is that many of the best professional traders in the world trade this market each day. Because of this fact, you are going up against some very smart and very seasoned traders that know how to take money from your trading account, and transfer it to their trading account. If you can learn to trade profitably in the ES though, you can transfer that knowledge to almost any other market and do well there.

One of the best things going today is that there are many brokers that will give you a simulation account that works and trades exactly like a live account, using the very same live streaming chart data that the live traders are using. It’s the closest thing you can get to trading real markets, except you will be using simulated money. Only a few years back, you had to “paper trade”, which was just writing down where you wanted to enter and exit the markets and assuming it would have all worked the same with live orders. Paper trading was a good way to learn, but it was nothing like real trading. Simulators today are much closer to the real thing, so they are a great training format.

If you are even remotely interested in day trading futures, I would suggest that you start by contacting one of the many brokers that will offer you a simulator trading option for free. Check out several of them and when you find one you like, open you a simulator account and start trading. The hardest part will be figuring out a strategy or system that actually works, and then practicing it until you can profit with it. Most people run out of money before they ever figure out what really works in trading. They simply give up and walk away having donated their trading account to other traders.

Trading price action is my first recommendation for a successful strategy, so I encourage you to start there. If you start with price action and learn to trade on the simulator without believing in the miracle working indicators that simply do not exist before risking your real money, you will automatically improve your opportunity to out last the associated learning curve. Just make sure you don’t risk a single cent of your real money until you can consistently make money every day on the simulator. Finally, regardless of what you decide in regards to which markets are best for day traders, stick to the one of your choice and become an expert in it!