If you swing trade, simultaneously day trade multiple markets or even if you’re considering a switch in product for your day trading, you’ll need to take into account a number of considerations in order to identify and select good markets to trade. I’ll run through a checklist of basics so you can get the gist and search for yourself.

2. If you swing trade, simultaneously day
trade multiple markets or even if
you’re considering a switch in product
for your day trading, you’ll need to
take into account a number of
considerations in order to identify and
select good markets to trade.

3. I’ll run through a checklist of basics so
you can get the gist and search for
yourself.

4. Type of instrument – You obviously
need to ask the question of which type
of instrument it is that you’re looking
to trade. It could be a stock, option,
forex, future, cfd etc.

5. Of course you don’t want to pigeon-
hole yourself into a certain type, but
there are nuances between each one
and besides, you may be constrained
by the broker you currently use.

6. Type of class – This is what the
product is or is based on. It could be
an equity, fixed income, index
derivative, forex or a commodity for
example.

7. And whilst a market is a market, there
are different price drivers for each,
different participants with different
objectives and different hallmark
behaviors.

8. You might find it more of a struggle to
trade your trend-based strategy in a
mean-reverting market for example.

9. Cost of trading – What exactly is it
going to cost you to trade a product?
I’m not just talking about the cost of
any commission or spread involved.

10. You have to consider how much cash
you need to put up in margin in order
to trade.

11. You also need to consider what the value
of the minimum price increment is (i.e. tick
or pip), the normal daily range of the
product and consider these factors in
conjunction with the size of your trading
account.

12. It’s no use deciding to trade the Dax on
your $5,000 account just because you
can get $2,500 intraday margin for it.

13. Liquidity – There are loads of products
that’ll meet your specific requirements
to trade them in theory.

14. But when you take liquidity into
consideration, your view on what you
can and can’t trade will probably
change.

15. An important consideration therefore
is going to be daily volume. Is there
enough volume trading on a daily basis
to be able to get in and out of the
market without too much trouble?

16. But total volume only tells part of the
story.

17. The other factor is order book liquidity.
This means how easy it is to get in and
out at every price even when the
market is moving quickly.

18. You can go from one end of the scale
with something like the E-mini S&P
500 that normally has many orders
during regular trading hours,

19. to the other with RBOB Gasoline
where prices move very quickly and
the order book is generally thin. Which
you choose depends on your strategy
and objectives (and depth of pockets).

20. Market Condition – There are
certainly some strategies that are
more robust than others and they
might work relatively well in several
types of market condition.

21. However, there are also some great
strategies that struggle when a market
shifts gear.

22. So in particular, if you’re looking at
trading a number of markets at the
same time it’s important to assess the
current conditions of any markets
you’re looking to trade as well to
keeping an eye on those you already
trade.

23. A good starting point is to do a quick
multi-timeframe analysis.
http://www.netpicks.com/trading-article/multi-timeframe-analysis/

24. Market Correlation – If you’re trading
multiple markets, it’s sensible to
diversify.

25. Although it’s important to recognize
that there are times when everything
becomes correlated, much of the time
markets tend to react to related
markets and may ignore others
entirely.

26. If you trade all the same sorts of
market, you are likely to be amplifying
your peaks and troughs which isn’t
particularly desirable.

27. Where to look – Finding different
markets can be a pain and not
everyone knows where to look. It
needn’t be a tough task though.

28. A list of products available from your
broker is a great start although many
specialize in certain types of
instrument. A great way of identifying
stocks is by using a stock screener.

29. However, not all of them are especially
helpful as they neglect to include
crucial data such as daily volume.
finviz.com has a nice screener and in
fact it’s a good starting point for other
market types too.