How to Pick the Right Day Trading Market

An exterior shot off the New York Stock Exchange
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The main day trading markets are futures, forex, and the stock market. The options market is also popular, although more so with swing traders (traders who hold positions for days or weeks, not minutes like a day trader). Most people are aware of the stock market; futures and forex are less well known, but can also be day traded. Here is a brief rundown of each day trading market.

The Stock Market

The stock market is what most people think of for day trading. It is a great day trading market, where day traders buy and sell shares of a company, exiting all positions before the close of trade at 4 PM EST (opens at 9:30 AM EST, but you can also make trades before this in the "pre-market").

To day trade stocks in the US, you need to maintain an equity balance in your account of $25,000 at all times. If you drop below that amount, you can't day trade. Recommended starting capital is at least $30,000.

The Futures Market

Futures markets are another popular day trading market. Futures are an agreement between a buyer and seller to buy/sell a certain amount of an underlying asset at a future date. Day traders make money on the price fluctuations between when they buy/sell a contract and when they close the position (before the end of the day).

You can start trading futures with much less capital than stocks. $3500 to $5000 will get you started day trading S&P 500 Emini (ES) contracts (one of the best futures contracts for day trading). Official market hours vary by the futures contract being traded, so you need to watch to make sure you are out of your positions before the close of trading for your contract.

Trading access for futures market day trading is also an important consideration. Most trading platforms have specific requirements for approval of futures and options accounts, usually including a minimum balance of more than $2,000.

The Forex Market

The forex market is the largest market in the world and also the most accessible, with trading 24 hours a day. Traders in the forex market can get started with as little as $100 with some brokers, although starting with at least $500 or $1000 is recommended. The forex market is where one global currency is exchanged for another. Most brokerage platforms typically only trade high volume pairs so there are some limitations to the currencies for investment.

For example, the USD/CAD is a commonly quoted currency pair. The price represents how many Canadian dollars it takes to buy a US dollar...and that price is constantly fluctuating. Day traders buy and sell currencies they believe will move higher or lower relative to other currencies, making money (hopefully) on the price changes.

Trading platform approval access for forex also has its own specific requirements. Investors should be cautious in choosing the platform that best fits their needs. Demo accounts are also typically available for forex trading so you can practice or test trading strategies.

Choosing a Day Trading Market

Which markets you choose to trade will depend upon several factors, including your financial position, your trading system, your personality, and your interests. Your finances are a good place to start. If you don't have at least $25,000, you can't day trade stocks unless you save up more capital.

If you have ample capital, then stocks, forex or futures are all great day trading markets. Is there one which interests you most? Certain strategies may also work better in certain markets, or at a certain time of day. Therefore, if you already have a strategy in mind (or have researched trading strategies)—pick one market and focus on it. As a new trader it’s not suggested to flip back and forth between markets, but you may be able to trade in shifts depending on the time of day in which you plan to trade.

Final Word on Day Trading Markets

Stocks, forex, and futures are the main day trading markets. All are great markets, and one isn't necessarily better than another. Based on personal circumstance and interests though, one market may appeal to you more. It is recommended to focus on one market before learning others, as you will find that you can fine-tune your day trading strategies to each market.