Traders: Which Markets Should You Trade?

By: Submissions

As technology advances and trading innovation continues, many traders want to diversify their investments. The prospect of making more profits have led many into trading markets they never thought possible. Although traders are continually seeking better markets and improved opportunities to explore, not many are in the know of the types of trading instruments available in this digital age. Surprisingly, traders are not the only ones looking to improve their chances of earning more. Even seemingly different markets are now attempting to steal each other's market share. For instance, traders no longer need to buy physical gold or even from a futures contract to participate in the movement of gold prices; instead, they can now buy an exchange traded fund (ETF). With that being said, similar scenarios are now possible with stock, currencies, commodities, and other investments. Hence, traders generally have a wealth of diversified opportunities they can leverage to their individual circumstances.

THE MARKETS

Depending on the level of education and experience, traders may or may not be totally aware of the investments or trading tools that are accessible with a click of the mouse. Even while attempting to avoid illiquid and abstract markets, traders can still find trades within many different markets.

Stock Market: You've probably heard some folks talk about buying or trading stocks. Well, there is nothing abstract about this market. The stock market simply involves shorting/buying shares of a company.

ETF Market: Funds representing all sorts of currencies, sectors, industries, and commodities. ETF trading is quite similar to stocks, and it can be bought and sold rapidly or held long term.

Forex Market: This well-known market is the largest trading market in the world. The forex market facilitates currency exchanges. In this market, currencies are always traded in pairs, with many possible combinations, but only some of which are very liquid. Traders are often compelled to work with regulated trading brokers in this industry.

Options Market: An options market is a market that allows traders to participate in the derivative of an asset. In this market, the option is not ownership of an underlying asset, but the option price fluctuates with the value that the underlying asset is offering.

Contract for Difference (CFD): CFD is a hybrid of the options, forex, and stocks market. This market allows traders to place trades in a derivative product based on an underlying asset. Generally, this market doesn't require traders to pay a commission or a premium, and it usually doesn't have an expiry date. But, it requires that traders pay a larger bid/ask spread than what they would see in a real-time market for a product.

Thanks to technology, these markets, and many others are now easily accessible to anyone from the comfort of their home. All you need is an internet connection!

Which markets should you trade?

I have come across many ambitious individuals and aspiring traders, and the one question peculiar to them all is: which of the trading markets is right for me? While that may seem like a rather daunting question for an aspiring trader, it is actually not so difficult to answer. The financial resources at your disposal, time of day you'd love to trade, the trading style you employ, and location, can all play a significant role in determining which markets will be best suited to the individual.

Financial resources: The stock market is generally an expensive market to trade, as traders are compelled to maintain an equity balance of $25,000 in their account at all times. A friendlier market in terms of starting capital is the forex market. Traders in the forex market can get started with as little as $100 with some brokers, although the recommended starting capital is at least $500-$1000, so as to ensure you stay in line with forex regulation. If you are financially buoyant, you can also try the futures market. You can start trading futures with about %3500 - $5000.

Time of trade

The futures market and stock market are excellent day trading markets. If you are cool with day trading and you have the financial muscle to get started, these are the markets for you. The forex market is another fantastic market for day traders.

By and large, if you don't have at least $25,000, you can't day trade stocks unless you save up more capital. However, if you have ample capital, then forex, stocks, or futures are all great day trading markets.

By Uday Tank

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