Which Market to Trade?
In trading, many traders give little or no thought to the market most important question “which market to trade?” And they end up becoming lost in the sea of trading. In choosing a market to trade, keep in mind that every “financial market” be it Stocks, Future, Forex or [Binary] Option has to meet two important criteria -liquidity and volatility. These criteria determine which market to trade.
Liquidity refers to the “average daily volume” in the market. The higher the volume the easier it is to get into a trade and out. One can enter into a trade in a thin market only to suffer huge slippage trying to take profits. In a liquidated market, there is always a “buyer for a seller” for example if i am to buy a share in a company for $10, there should be a seller willing to sell to me at the exact $10 price and not $10.1 or less -that will result in either a negative or positive slippage.
Volatility is the extent in the market, the more it moves the grater the trading opportunity, a good example will be “stock, stocks of many famous companies are very liquid but hard to trade because of low volatility” -they tend to stay in narrow price range. Some “low-volume, low-volatility” stock may be a good investment for “long term investors not for traders“. Remember, not all market are good for trading. A suitable market for a “trader” must have a good volume and move very well.
Below are some of the markets which I have carefully analyze, endeavor to read them up, so as to understand which market might be suitable for you: