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Trading Tips

Picking the Right Market to Trade

Here’s a question I know a lot of new traders have – or at least they should have – as they are getting started in trading.

I am trying to figure out what market fits “me” or “my personality”. How can you do that without having tried to trade all those markets first?

In the end, it might come down to giving different markets a test drive of sorts, but before that point there are a couple of things to think about when selecting a market to trade.

Trading Timeframe
Some markets can be ruled out based on the timeframe you have to work with. For example, you aren’t going to day trade stocks or futures if you can only access the market outside of exchange hours. Generally speaking, the longer your trading timeframe term the more markets are open to you. The shorter the timeframe, the fewer become realistic options.

Capital
As much as the barriers to entry have been lowered in many markets, there are still things that have minimums which rule some traders out. The futures market is a notable example there. The contracts are of a fixed size with specific margin requirements. If you don’t have the margin capital, plus a heathy amount beyond that, then you can’t play that market. Even a market like stocks where you could play with relatively little money might not make sense for some people because of the transaction costs.

Interests
It helps to trade a market you have an interest in. It will make you more eager to learn and understand and not just make it some abstract thing. This can be an important contributor to having a long-term positive trading experience.

Access to Tools and Information
This is a fairly minor point at this stage, but in some cases you will have better access to what you need to trade in one market than you will another.

I think you’ll find that if you work through this list you’ll probably find a market which suits you without having to try them all out. And even if you can’t make a final selection between a couple of alternatives, you can always demo trade those markets to see which one feels most right.

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Deep Posts Reader Questions Answered

Where do I go to find good stocks to invest in?

Got this question from a member of my mailing list the other day.

John,

Where do I go to find good stocks to invest in  Is there a particular source you’d recommend?

Albert

Unfortunately, I’m about to make an example of Albert here.

The very short, very simple (and definitely smart-alecy) answer to the question he asked is the NYSE, NASDAQ, London Stock Exchange, Tokyo Stock Exchange, etc. There are good stocks for investment all over the world.

My guess is that’s not the question Albert is trying to ask, though. I’m thinking he’s asking how to identify good stocks to invest in – what tools or resources help in that process. The problem is the question is too vague. In order to answer it with any real meaning I’d need to have an idea of Albert’s objectives, time horizon, and things like that. It makes no sense for me to recommend something that is good for identifying long-term plays if he’s looking for something more momentum oriented. I also need to know what type of investing/trading style Albert favors. If he favors technicals, it makes no sense for me to suggest something fundamentally biased.

I’m not trying to slam Albert here. It’s just that his question is typical of the type of question many market newbies ask. They are much, much too general for anyone to really be able to help them, except by blind luck. Do yourself a big favor and be as specific and detailed in your inquiries as you can be. It will go a long, long way to help get you the information and advice you’re after.

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News & Updates

Do you have trading questions? I have answers – probably

The markets of late have been extremely challenging. Heck, that’s probably an understatement! 🙂

Is it confusing? Are you struggling to come to grips with it all?

Let me know what’s getting you. What questions do you have? How can I help you make sense of it all?

I love helping traders learn about the markets and develop a better understanding of trading. A large number of the posts I write for this blog are answers to questions I have received from all different types of people. Don’t hesistate to send one or more questions of your own.

While I certainly don’t know everything, I will answer all questions to the best of my abilities, or point you to a resource which should help. Drop me a line.