"Tricks of the Trade" Seminar
"Markets To Trade"

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There are two conisderations when deciding on which markets to trade on a short term time frame:

  • Liquidity
    If there is not sufficient volume in the market then there will not always be someone to take the other side of any entry or exit that you may want to do. This will result in "slippage" i.e. a difference between the price that you see on the screen and the price that you are executed at. The shorter the time-frame that you are trading the more of a handicap slippage is.

  • Volatility
    Even if there is plenty of volume in a market, if the market does not move a great deal during the day it is going to be hard to make money. Take the 3 month interest rate futures on LIFFE such as Euromark futures for example which enjoy a good daily volume but the daily range is a few ticks at most so that there is little opportunity for day-trading profit

  • LIFFE Futures Markets
    As far as the UK LIFFE futures markets are concerned the following markets fulfil these criteria:
    FTSE 100 Index Futures
    Long Gilt Futures
    German Bund Futures
    Italian Bond (BTP) Futures
    Most private futures traders tend to trade the FTSE futures, whether because they used to be equity traders or not I am not sure. However, it is actually quite a difficult market to trade successfully. Many like the fact that the tick size is large compared to typical commission rates but this can be a double-edged sword: losses mount up faster as well as winnings with a large tick size.

    • My personal preference at the moment is for the Italian Bond which has good liquidity and no shortage of volatility! I find that for day trading etc. it is a lot easier than the FTSE.

  • Get to know your market
    Whatever markets that you choose to trade, it is important to get to know them, how they trade etc. as every market will have its own little foibles. There is no substitute for experience.

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