The best market to start trading for newbies is most often said to be the Forex market. At Inspire Trades, we feel this is misleading as the Forex Market can be difficult to trade in a well regulated and safe manner due to its decentralised nature. To find out generally about starting to trade, please read our starting to trade article available (here).
The best market to start trading is the futures market!
The futures market is centralised and very well regulated with extremely low commissions. There are also instruments available that are suitable for every size of wallet. There are instruments that you can trade with as little as $100 on account with your broker for daytrading although we would recommend $500 as a more stable account. If you want to hold positions over-night, from about 4PM to 9.30AM EST, we recommend at least $1500 with your broker because of the higher over-night margin requirements.
What are the best instruments to start trading?
So from $100 on account with your broker, you can trade the real futures markets where professional traders and institutions trade every day in a safe and regulated market. When you are starting out we would suggest the futures contracts of the following instruments:The Micro E-mini S&P500 (MES), Micro E-mini Nasdaq100 (MNQ), Micro E-Mini Dow Jones Industrial Index (MYM), Micro E-mini Russell 2000 (M2K), Micro E-mini Gold (MGC) and Micro E-mini Euro (M6E). There are others available with similar low risk exposure but the ones mentioned here are the strongest as they have the highest order flow meaning it is easy to get in and out of a trade at the desired price without slippage (which is very common when trading Forex as the market is much less regulated).
Why are these instruments best to start trading?
The instruments above are great starters as they are traded on a central exchange with all orders going through one very well regulated exchange and the risk is very low, all of them are 50c per pip except for M6E and MES which are $1.25 per pip. This means that a typical trade where the risk may be 10 pips, you are risking no more than $5-$12.50 which is 1% of a $500 or $1250 account respectively. As we recommend risking only 1% of your account on every trade, these constitute excellent scalable instruments. When your account has grown from $500 to $1000 you can simply take the same type of trade with the same risk profile simply by adding a contract and as the strategy works with one contract as you have doubled your account, you can simply add another contract and double the return. With another $500 on account, add a third contract, increase your revenues again! All the while, risking only 1% of your account and using exactly the same strategy as what you already know works!
So why not Forex, can I not keep the risk low and scale positions with Forex?
Yes, you can keep the risk small and scale your position with Forex but there are higher risks trading Forex as the market is less regulated and the commissions and spreads can be variable depending on volatility, making it more difficult to plan and execute trades with predetermined accuracy. Whatever the required movement from entry to profit remains the same regardless of market condition and the commissions are regulated and don’t vary when you trade futures. Forex have several unknowns making it difficult to remain profitable.
Is there anything more?
Yes!When you learn by trading the micro contracts, you are automatically geared up to switch your trading up to the E-Mini contracts at 10 X the risk and profit of the micros or even the full size contracts, 100 X the size of the micros! You need to change nothing and the peculiarities of the traded instruments will remain the same regardless of Micro, Mini or Standard size contracts! The only thing that changes is the amount of money required in your account as well as the monetary risk and reward but NEVER the percentage risk!
Happy Trading and may the trades be ever in your favour!