Equity Cash market, Stock Futures, Stock Options in Share Markets or other markets – Commodity or Forex?
To be a successful trader, you need to understand what you should be really trading for living.
It is necessary to choose & trade the right market that could become your niche market – the market that you would trade daily, get comfortable with & make money with ease.
I know, initially, it would be very difficult to decide where your expertise would be – trading in Share markets, Currency or Commodities markets.
For a novice trader, Equity Cash market is the best market to start trading. You can buy and sell any stocks with little money & risk.
But as you gain experience & try to become professional, you would surely want to try other greener avenues for more profit & rewards.
How to choose my niche market?
Choosing your niche market is majorly dependent on trader’s risk appetite, his preferred trading time, trading styles & his comfort level of the market. More on this below…
Your risk appetite:
Different markets carry different inherent risks. For e.g. Stock Futures & Options or Currency are riskier to trade than Cash Market because of the more leverage (margins) you get.
This leverage is what attracts the traders as they can make good profits in quick time.
So, an aggressive trader could make F&O; markets his niche market while a safe trader who does not want to take much risks will go for Cash Market.
Market Hours:
For a trader, it is necessary that he is comfortable & free enough during the market hours to put his trading plan & strategies at work.
Also, definitely, a day trader would not want to be asleep when the share market is making new highs / low.
Commodity market in India opens at 10 AM and closes around 11:30 PM. So, if someone wants to trade only during during day time, this may not be his preferred market.
Investor or Trader?
Investing requires holding onto stocks for longer term. But few markets, by its nature, are meant only for short term traders.
If one thinks to invest for long term, F&O; / Forex would definitely not be the markets to trade. Rather, you should invest in Stock Markets & Commodities.
But for a trader looking for short term trading, he would be interested in buying current month / near month futures or call/put options or cash market.
Liquidity of the market:
For aggressive short term traders, high participants with high volumes are what attract them. They can get into the market quickly and exit anytime due to the liquidity offered by the market.
Forex market offers more liquidity than share markets. So, such aggressive traders would want to trade more in Forex market than other markets.
Impact of Global Factors:
Global news, events, economic developments has more impact on markets like Forex than Stock or Commodity market.
If a trader could not afford wild swings due to such events & developments, currency market is not the right market for them.
