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 Post subject: Best Market to Trade?
PostPosted: Thu Jan 15, 2009 1:04 pm 
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Joined: Sat Jan 10, 2009 2:06 pm
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Location: Canada
ImageWhat is the best trading instrument to trade from among so many that are available on the Cme, Cbot, Ice, Eurex, Euronext, Nymex, Comex, Forex and Exchange Traded Funds?
______________________

It's a simple decision even though things can get more complex if you want.

Backtest your method on all the instruments your considering for trading and then select the trading instrument with the best results (the one that's more profitable than applying your strategy to all the other trading instruments) and select it as your primary trading instrument. Next, the trading instruments with the second and third best backtest results can be designated for trading as your backup trading instruments if your having data problems or exchange problems with trading your primary trading instrument.

For example, its possible that your strategy performs the best while trading Eurex DAX and the second best performer is the CBOT mini-sized Dow YM futures and the third best performer is the Exchange Traded Funds SPY. It's this reason alone that you should always be following the price action of the top three trading instruments for your strategy because you never know when you will not be able to trade your primary trading instrument.

A simple analogy, you have two computers...one is your primary computer to trade and the other is your backup computer just in case your having computer/hardware problems or doing important updates/upgrades on your primary computer. Therefore, you'll be able to continue trading with very little interruption even if your primary system goes down.

With that said, things gets complex about the selection of a trading instrument via the below three reasons:

1. Backtest results

2. Favorite trading instrument your the most comfortable with in trading

3. Trading instrument that causes less conflict in your personal/family schedule

For example, my backtest results reveals that the most profitable trading instrument via my methodology is the Eurex DAX futures, Hang Seng HSI futures and Light Crude Oil CL futures. Yet, I trade the ICE Emini TF futures because it fits well with my personal/family schedule due to the fact I live in the U.S. and trading the other trading instruments during their first few hours of important volatility doesn't correlate well with my family life schedule as a home-based retail trader. Therefore, you need to determine which of the above three reasons is the most important reason for selecting a trading instrument.

Last of all, be careful about the merits of commentary by other traders about what's the best to trade unless you're using the same trade strategy and/or have similar like personal/family schedules.

Too many beginner traders fall into the trap of trading a particular trading instrument recommended to them by someone that has a different market strategy in comparison to the beginner trader's market strategy...costly mistake.

Best Regards,
M.A. Perry
Trader and Founder of WRB Analysis (wide range body/bar analysis)
Image@ http://twitter.com/wrbtrader
http://stocktwits.com/wrbtrader
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