Which Market to Day Trade? Stocks, Futures or Forex?

The pros and cons of each market

which market to day trade, stocks, forex or futures?
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Most people think of the stock market when they hear the term "day trader." Day traders also participate in the futures and forex markets, not just stocks. If you want to become a day trader, before you start you'll need to choose a market. Focus your learning and practice time on that single market in order to excel at it. Once you master one market trading other markets should be easier. That said, new day traders should pick and master one market before attempting to trade others.

Here are things you should know about of trading stocks, futures and forex. This knowledge will help you decide which market works best for your lifestyle, constraints and goals.

Day Trade Stocks 

If you're thinking of day trading stocks, here are things you should know.

  • Minimum required starting capital is $25,000 to day trade US stocks. Recommended starting capital is at least $30,000.
  • Market hours from 9:30 AM to 4 PM EST. Many day traders also place trades in the hour leading up to the open, called the pre-market. 
  • Best "bang for buck" occurs between 8:30 and 10:30 AM, and/or 3 to 4 PM EST. 
  • A near infinite number of stocks to trade. This is both an advantage and disadvantage. You can trade the same stocks each day, or do research to find new stocks to day trade each day or week.

Based on the these factors you'll likely be able to see if the stock market is a reasonable market for you to day trade.

If you don't have $30,000 then you'll likely want to consider forex or futures, which require less capital. If you can't trade between the hours of 8:30 to 10:30, or 9:30 to 10:30 AM and/or 3 to 4 PM EST, then your trading efforts won't be as efficient as they could be.

Many day traders trade the same stock every day, regardless of what is occurring in the world.

Once you know a stock trading strategy, little additional research time is required for this method, since you are always trading the same stock. Other traders focus on stocks of high interest on a particular day. This takes a bit more research and digging each day. If you choose to day trade stocks, decide whether you will trade the same stocks all the time, or switch it up daily/weekly.

Day Trade Futures

If you're thinking of day trading futures, here are things you should know.

  • Recommended starting capital is at least $3500 to $5000, if trading a futures contract like the S&P 500 Emini (ES). The recommended starting capital varies based on the futures contract you trade, but if you're starting out then trading ES is recommended.
  • Official market hours from 9:30 AM to 4 PM EST for ES. Many day traders also place trades in the hour leading up to the open, called the pre-market. 
  • Ideal time for day trading ES futures is between 8:30 and 10:30 AM, and 3 to 4 PM. 
  • If you trade other futures contract, such as crude oil, or futures associated with European or Asian markets, those contracts often provide great day trading opportunities outside of the official market hours of the US stock exchange. This provides some flexibility if you are unable to trade during the ideal day trading times for ES.
  • Most futures day traders focus on opportunities in one futures contract. They become an expert at trading that one futures market, and won't often trade others. That said, there are day traders who prefer to trade where the action is, occasionally trading a futures contract that is seeing big movements or volume on a particular day.

Based on these factors alone you'll likely be able to see if the futures market is a reasonable market for you to day trade. If you have less than $30,000, then futures are an option. If you want to trade the S&P 500 Eminis (ES) then try to trade between 8:30 to 10:30, or 9:30 to 10:30 AM and/or 3 to 4 PM EST. If you can't, there are other options. Consider day trading a global commodity which sees movement around the clock, or futures associated with Europe or Asia.

European and Asian futures contracts present opportunity before the US stock market open, and after the US close, respectively.

Day Trading Forex

If you're thinking of day trading forex, here are things you should know.

  • Recommended starting capital is at least $500 to $1000. More than $1000 is recommended if you want a decent monthly income stream.
  • Forex trades 24-hours a day from 5 PM EST on Sunday to 5 PM EST on Friday. Not all these times are ideal for day trading though.
  • Best times to day trade forex depends on the pair being traded. That said, major pairs like the GBP/USD and EUR/USD are best traded between 3 AM and noon EST. See Best Times to Day Trade EURUSD for more precise times.
  • Lots of currency pairs to day trade, although it's recommended new day traders stick to the EURUSD or GBPUSD. These provide more than enough volume and price movement to create a day trading income.

Based on these factors you can likely determine if the forex market suits you. If you have limited capital to start day trading (less than $3500 to $5000) then forex is your only option (or you have to save up to trade the other markets). Forex is flexible in that you can trade outside of US market hours; that helps if you have another job during normal business hours. 

Which Market to Day Trade

Now that you know some of the basic entry requirements for each market you can start digging into the one that suits your life, and interests you, the most. Constraints play a role. If you want to day trade stocks, but have minimal funds, consider forex or futures instead. All three markets offer great income potential, but one may have certain elements which appeal to you more. Select your market, and become a master of it.