Another common question that I often get is about which markets are best for price action trading? We prefer to trade the ES for specific reasons that we will discuss in a moment, but first let me clarify that price action trading strategies work in any market and in any time frame. Price action is universal and it’s really nothing more than the actions of all traders as their buying and selling prints to a chart. If you were to remove the headings from a 5 minute chart in the ES and then remove the headings from a daily or weekly chart in any other market or stock, it would be almost impossible for you to determine which market and which time frame each chart came from. If they were both trending in the same direction, you might even think they were from the same market and time frame. Price action trading works in stocks, futures and Forex, so you can use it universally in your market of choice.
Let me now explain why we stick almost exclusively to the ES or Mini S&P futures for our favorite trading market. There are some important factors that you will want to look for when trading any market, although there are multiple markets that will have these same factors from which to choose. Volume is probably the most important aspect because you want to make certain that there is sufficient volume so that you don’t get slippage, particularly if you are a scalper. If you trade the ES during regular trading hours, there is almost no worry with any slippage whatsoever for retail traders. This is a market in which you can grow your trading and you can actually trade large numbers of contracts without having to worry about even a single tick of slippage. Very few markets can make that claim, so it is widely traded by professional traders for this reason alone.
Another important factor is commissions and costs to trade. We can trade the ES so cheaply that we can actually make a profit on a single tick, so that’s important if you find you need to scratch a trade or exit early. There are not many markets where only a single tick in your favor can put you into profits after commissions and expenses, but you can certainly do this in the ES and a few other futures markets such as most of the currency futures. Many people fail to understand the importance of commissions, but if you trade full time for a living, those commissions can add up quickly, so make sure you do not miss this important aspect of trading any market. I hear people say often that they like to trade Forex because there are no commissions, but that is nothing more than a slight of hand and if you can’t see it, you shouldn’t even be trading. There is a spread in Forex between the entry and exit prices, so there is normally a couple or more ticks of cost to enter and exit a Forex trade, making it one of the most expensive markets around to trade, while it is being advertised as commission free!
It is our opinion that traders should find a single market to trade so that they can become an expert in that market. Every market has a personality all it’s own, and the better you understand that market and it’s personality, the better you will become at trading it. This is the reason we stopped watching multiple markets a long time back. If you are watching more than one chart, then you can not concentrate on any single chart consistently, and that can cause you to make errors and miss important set ups. By sticking to a single market you not only become an expert in that market, you also don’t get distracted by moving from chart to chart. Simplifying your trading will help you to improve more than most people might realize. By watching only a single chart in a single market, this also means you only need one trading screen, meaning a lap top alone is the only trading tool you really need to be a profitable trader. Simplify your trading and you will find that your trading will improve from that aspect alone. It’s our opinion that simple is better when it comes to trading.
Hopefully you now understand that price action trading strategies work in any market and in any time frame, but we also hope you understand why some markets are better than others. We explained why we like the ES and why we believe that you should find a single market to trade, even if it’s some other market besides the ES. Many people think the ES is too difficult and too boring, and while it is a difficult market to trade in the beginning, it is the predictability of the ES that we like and this allows us to get to know that market extremely well, thus improving our trading results at the same time. If you want to learn how to use price action trading to improve your trading results, then you can find more information on how to get started at http://priceactiontradingsystem.com/pats-price-action-trading-manual.