Stocks vs. Futures vs. Forex

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Most people think of the stock market when they hear the term "day trader," but day traders also participate in the futures and foreign exchange (forex) markets. (Some day traders buy or sell options, but traders who focus on the options market are more likely to be swing traders, who hold positions for days or weeks, not fractions of a single trading day.)

If you want to be a successful day trader, you should initially focus your learning and practice time on a single market. Once you've mastered that market, you can try your hand at other markets if you choose.

Day Trading Stocks 

If you're thinking of day trading stocks, here are some key facts you should know.

  • The minimum required starting capital, under U.S. law, for day trading stocks is $25,000. To give yourself a buffer above that minimum amount, you should start with at least $30,000 of capital.
  • Market hours are from 9:30 a.m. to 4 p.m. Eastern time. Many day traders also place trades in the hour leading up to the open, called the pre-market. 
  • The best times to trade shares, when volume and volatility are high, are typically 8:30 to 10:30 a.m. and 3 to 4 p.m. ET. 
  • There's a huge number of stocks you can trade. You can trade the same stock or handful of stocks every day, as many traders do, or conduct research to find new stocks to day trade each day or week.

Based on those factors, you'll likely be able to see whether the stock market is a good one for you to day trade. If you don't have $30,000 available, then you'll want to consider forex or futures, which require less capital. If you can't trade during the optimal trading hours, then your efforts are unlikely to be as successful as they would be if you were available during those hours.

Many day traders trade the same stock every day, regardless of what is occurring in the world. Once you have developed a stock trading strategy, little additional research time is required for this method, since you are always trading the same stock; you have to keep up with developments only in the one publicly traded company.

Other traders focus on a stock or stocks of high interest on a particular day or maybe for an entire week. This method requires a good deal more research.

Day Trading Futures

If you're thinking of day trading futures, here are some key facts you should know.

  • There's no legal minimum amount required to day trade futures. Recommended starting capital is $2,500 to $7,500 if you're trading a popular futures contract like the E-mini S&P 500. The more money you have, the more flexibility you will have in your trading decisions.
  • Official market hours for trading the E-mini S&P 500, whose ticker symbol is ES, are from 9:30 a.m. to 4 p.m. ET. Many day traders also place trades in the time period leading up to the open, called the pre-market
  • The ideal times for day trading ES futures are 8:30 to10:30 a.m. and 3 to 4 p.m. ET. 
  • Commodities futures contracts or futures associated with European or Asian stock markets often provide reliable day trading opportunities outside of the official hours of the U.S. stock market. Those markets might be worth exploring if you are unable to trade during the ideal times for the ES.
  • Most futures day traders focus on opportunities in one futures contract after gaining proficiency at trading it. That said, there are day traders who prefer to trade where the action is, choosing futures contracts that are seeing big movements or volume on a particular day.

Based on those factors, you'll likely be able to see whether the futures market is a good one for you to day trade. If you have less than $30,000, then futures are a possibility for you.

If you want to trade the ES, then you'll want to trade during its optimal hours. If you can't, consider day trading a global commodity, such as crude oil, that sees movement around the clock or futures associated with European or Asian stock markets. European and Asian futures contracts present opportunities before the U.S. stock market open and after the U.S. close, respectively.

Day Trading Forex

If you're thinking of day trading forex, here are some key facts you should know.

  • The minimal starting capital is $500, but $5,000 is recommended if you want a decent monthly income stream.
  • Forex trades 24 hours a day from 5 p.m. ET on Sunday to 5 p.m. ET on Friday. Not all these times are ideal for day trading, however.
  • The best times to day trade forex depends on the pair being traded. The British pound/U.S. dollar (GBP/USD) is ideally traded from 4 a.m. to 6 a.m. ET and 8 a.m. to 11 a.m. ET. The euro/U.S. dollar (EUR/USD) is best traded from 9 a.m. to 2 p.m. ET.
  • There are many currency pairs to choose from, but new day traders should probably stick to the EUR/USD or GBP/USD. Those pairs offer more than enough volume and price movement to provide day trading income.

Based on those factors, you'll likely be able to see whether the forex market is a good one for you to day trade. If you have limited capital to start day trading, then forex is your only option. And the forex market is flexible in that you can trade outside of U.S. market hours; that helps if you have another job during normal U.S. business hours Monday through Friday.

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