Best Markets for Day Trading – A Complete Review

If I were to ask what the best markets for day trading were, the majority of people would respond Forex or Penny Stocks.

Most marketing pushed at new traders is primarily centered around Penny Stocks or Forex. Especially when it comes to education. However, I don’t believe either of these are the best markets for day trading, especially if you’re a beginner.

You might ask, “Why are the majority of educators teaching these markets then?”

The main reasons is leverage and barriers to entry. Most people don’t have $25,000 to start trading to get past the Patter Day Trading Rule established by FINRA. You can open a Forex Account with most brokerages for $1000 and in some cases even less.

On the same note, Penny Stocks offer high volatility with the potential for big returns considering a higher leverage due to the price of the underlying assets coupled along with high volatility. However, this is a dual edged sword that most new traders fall victim to.

In this article we will discuss the advantages and disadvantages of trading Penny Stocks, Options, Forex, and Futures giving you everything you need to make an informed decision on what markets are best for day trading.

Best Markets For Day Trading

To begin, let’s review some factors you need to consider when deciding which markets are best to day trade.


Market liquidity describes the ease at which you can buy or sell a security without affecting the asset’s price.

When trading in an illiquid security, there becomes a point where you begin to manipulate the price when you enter and exit a security. This creates two problems.

  1. It puts a cap on how large you of a position you can eventually put on. Thus limiting your overall upside as a trader.
  2. During volatile times, this makes it impossible for you to properly calculate your Reward to Risk as you never really know where you will be able to exit a position. This can be a recipe for disaster.

Ultimately, you want to be trading markets with high liquidity and enough volatility to be able to capture some decent moves.

News Risk

Next you want to consider any potential or unforeseen news risk that you may experience when trading. Every security is susceptible to news risk but some more than others.

Individual stocks are going to have some of the highest news risk when compared to trading an entire Index or a Currency which are more effected by macro events.


Volatility refers to the amount you can expect a securities price to move. The higher the volatility the wider the range. Most trading strategies benefit from higher volatility. If a security isn’t moving, typically a trader will get chopped up.

There are trading strategies that benefit from low volatility using options but most day traders, especially if you’re new to trading, look for markets with higher volatility.

Other Advantages/Disadvantages

Certain securities have additional benefits over others such as the ability to short at any give time, potential tax advantages, and more.

Penny Stocks

Liquidity – Penny stocks are some of the lowest liquidity securities you can trade. This eventually will put a cap on your earning potential.

News Risk – Penny stocks have very high news risk and are often halted. A lot of traders become victims of the classic pump and dump.

Pump and Dump Penny Stock

The chart above of MGT, now MGTI, is a classic example of a pump and dump. You can see price rose over just a few days doubling the value of the company in January and again in March and then selling off to new lows.

Volatility – As seen in the example above, penny stocks are extremely volatile. Veteran traders may see this as an advantage but for newer traders this typically spells to an account with no money.

Other Advantages

  1. Due to the increase in algorithms in the markets over the last 10 years market transparency has greatly diminished. However, I still believe Level II quotes still provide a slight edge when trading penny stocks as compared to mid or large cap stocks.

Other Disadvantages

  1. The low price of penny stocks partnered with high volatility can allow traders with small accounts to hit big winners. Yes this can be an advantage, but the opposite holds true more often in that traders will be over leveraged and take huge losses.
  2. Penny stocks can also be hard to borrow meaning you may not be able to take a short position limiting you to only long positions.
  3. Finally, penny stocks fall under the pattern day trading rule established by FINRA limiting the number of trades you can take per week if you have an account balance under $25,000.


Penny stocks rank at the bottom of my list when consider the best markets to day trade.

There are some very successful traders that trade penny stocks such as the very well know Timothy Sykes. His performance speaks for itself.

However, even Tim’s upside is capped due to liquidity issues when trading penny stocks. Not to take anything away from Tim as he is a great trader, but when I think of great traders I personally have worked with, they make in a year what Tim has made in his entire career.


Liquidity – Similar to penny stocks, liquidity can be a problem with options depending on the underlying asset your trading. Some index options have decent liquidity but spreads can still be fairly large when compared to futures.

News Risk – News risk can be lower than penny stocks or individual stocks with options depending on the underlying asset. If you are trading index options you odds of significant news risk are much lower than individual stocks.

Volatility – Option volatility can be high depending on the underlying asset.

Other Advantages

  1. Options offer increased leverage.
  2. Index options typically have decent liquidity.

Other Disadvantages 

  1. Options are much more complex securities to trade when compared to other securities due to having to consider components like time decay.
  2. Fall under Pattern Day Trading Rule


Options traditionally haven’t played that large of a role in the day trading arena but they are becoming more popular. I tend to stay away from them when day trading as price movement can be dampened due to the time value element of an option as well as larger spreads when compared to trading an individual stock.

Although I don’t recommend them for day trading, options do have value especially when investing. Most new traders are scared of options due to some of their unique components, but in reality they aren’t that complicated.


Liquidity – The Forex Market is the most liquid market in the world trading upwards of 5 Trillion Dollars per day.

News Risk – News risk is greatly diminished when compared to other markets. Currencies are obviously susceptible to macro news events but nothing in terms of the volatility when compared to individual stocks.

Volatility – Having a number of major currencies to choose from such as the Pound, Yen, or Euro you can generally find great opportunities.

Other Advantages

  1. The foreign exchange is a 24 hour market.
  2. No Pattern Day Trader Rule
  3. Low Commissions

Other Disadvantages

  1. Low Transparency


Forex is one of the best market for new traders. The main downfall is the light regulation on Forex Brokers in terms of capital and margin requirements. One of the main reasons new traders fail is due to improper money management and having access to huge leverage doesn’t help.

I currently don’t trade Forex anymore due to the fact that Currency Futures offer a much better tax advantage for U.S. traders.


Liquidity – Extreme liquidity especially when trading eMini S&P 500,eMini Euro Futures, and eMini Crude Oil Futures.

News Risk – Similar to the Forex Market, news risked is mitigated and futures are primarily effect by macro events.

Volatility – A number of volatile markets with very low correlations provide good opportunities for day traders.

Other Advantages

  1. 24 Hour Market
  2. Not subject to Pattern Day Trading Rule
  3. Tax Advantages for U.S. Traders – 60% of income taxed at long term capital gains (15%) and 40% taxed at short term gains (35%). Please consult with your accountant.

Other Disadvantages 

  1. Low Transparency


The futures market is my primary market of choice. If it wasn’t for the tax advantages of futures are probably would focus primarily on Forex. However, the tax advantage lowers my effective tax rate down to 23% which is enough of a deciding factor for me.

Similar to options, a lot of new traders think futures are confusing or have some mystical concept when in reality futures are quite simple to understand.

There you have it, a complete review of the best markets for day trading. Hopefully this helps you understand the advantages and disadvantages of every market when considering what you will trade. Have you traded any other markets? If so share you’re experiences!



Adam is the founder of Jumpstart Trading. He began his trading career in 2003 as a proprietary equity trader for GPC, which at the time was the second largest prop firm in the United States. While with the firm he achieved top 10 performances and became one of the youngest trainers for the firm. In 2008 he moved on to trade his own capital while developing multiple trading strategies and algorithms. He has quickly become recognized as one of the elite order flow traders in the industry. Today Adam primarily focuses on U.S. Index futures.


  1. Myrlaviani Rivier

    Hi Adam,
    Great content! I’m curious about your thoughts for a new trader to begin with trading treasury notes? What potential pitfalls and preliminary work would provide the new trader with valuable insights into trading futures?


    1. Thanks for the comment Myrla! I have to be honest, I have never traded notes or any treasury bonds for that matter. It’s one of the few securities I’ve never traded. I like the S&P because of the volume and it also historically provides more volatility.

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