If you are thinking about starting an
online trading activity, you will inevitably be called upon to make some choices. Many of these are so important that they significantly impact profit hopes and, in general, investment methods. Among the choices to be made, the one relating to the market stands out. The context of online trading, even from the point of view of the retail trader and even the layman approaching this kind of activity for the first time, is truly complex. The possibilities are numerous. So,
which market should you focus on?
There is no single answer to this question. In some ways, it is even subjective. However, this does not mean that it should not be done methodically, taking into account some stringent criteria. Most of these have a technical nature, so they cannot be addressed without prior reflection, perhaps preceded by an intense work of information gathering.
In this article, we will provide tools so that everyone can answer the question: which market for online trading? We will do this by listing
the criteria for the choice and offering specific advice.
Volatility
Markets differ in many ways. One of the most important is volatility. There are
volatile markets and less volatile markets. Markets where prices fluctuate more often and more deeply, and relatively calm markets from this point of view. Obviously, it is the oscillations, often in both directions, that offer the
best profit opportunities, especially if you practice fast trading. But there is no doubt that a volatile market is also quite unpredictable, or risks being so often.
Therefore, the
concept of volatility is connected to that of risk. Participating in a volatile market means being able to take advantage of better profit opportunities, but also being exposed to greater risks. So, before choosing this or that market, evaluate
your risk propensity, which depends on both economic resources and psychological (and emotional) patterns.
From a purely technical point of view, the most volatile market of all is that of cryptocurrencies. It is first in this special ranking and it is by a wide margin. The second is the
stock market, followed by the currency and commodity markets. The
bond market, on the other hand, is relatively quiet, to the point of being considered predominantly even by those who want to invest their savings, without practicing speculative investment.
Readability
This is also an important criterion, moreover often overlooked by beginners, by those who are thinking of entering the world of online trading and perhaps are studying to become a trader. Readability means the degree of difficulty in identifying the trend and, if possible, knowing in advance the direction prices will take. Readability depends on many factors:
liquidity, the structure of the investor base (very large ones have enormous discretionary weight), and the relationship that binds the asset to the economic, financial, social and political context. Indeed, the latter is perhaps the most important factor. Assets, and therefore markets, that have a close interdependent (often dependent) relationship with the outside world are highly readable. From this point of view, it is relatively easy to make a ranking.
Certainly at the top we find the
Forex. The value of the various currencies depends a lot on the performance of the related economy. Not only that, it depends almost absolutely on the monetary policy initiatives of the respective central banks. The reason is primarily technical: by modifying rates, and not infrequently through quantitative easing programs, central banks intervene on the money supply. Another factor that goes to the full advantage of liquidity is the fact that, precisely to avoid strong "unwanted" oscillations, central banks warn in advance of changes in monetary policy.
Normally, given the close link with the real economy, the stock market should also be considered readable. However, this
default readability is tainted by the emotional and psychological element, which in the stock market is sometimes dominant. Notice it: when you hear the phrase "panic in the markets", the greatest oscillations are seen in the stock market.
In online trading activities on readable markets,
fundamental analysis plays a great importance, which is precisely the study of the external environment for analytical purposes, to understand the present and future direction of prices. Therefore, if you think you will feel at ease with fundamental analysis, with this type of study,
seriously consider the readability criterion.
Liquidity
Liquidity is a very important concept, it is certainly a criterion to keep in mind when choosing the market on which to base one's online trading activity. A market is liquid when it manages to move high traffic volumes, very simply. It must be said, however, that given the complexity of the world of finance and investments,
all markets are liquid. This does not mean, however, that
they are equally liquid.
Some, in fact, are
extremely liquid. The reference is in particular to the
Forex, which leads this special ranking. It manages to move something like 5,000 billion dollars a day, a figure equal to more than double the Italian public debt, which is the third in the world. Among other things, 60% of the traffic is generated by the euro-dollar pair, which not surprisingly refers to the two richest and most important economies on the planet (United States and European Union).
Among the less
liquid markets, at least for now, the cryptocurrency market stands out. The reason is almost trivial: it has not yet spread like wildfire. The number of investors, especially institutional ones, is still low.
The
liquidity of a market affects the performance of the market itself. If a market is not very liquid, it is inherently manipulable, precisely because the weight of large traders increases. Therefore, it risks being truly unpredictable. Keep this dynamic in mind, and the risks it entails, when choosing the market.
Prior knowledge
There is no online trading university. The training paths are completed in a self-taught way, at least in part, despite the abundance of educational material offered by brokers. In any case, the path is often subjective. If only because everyone starts from different positions, from different
backgrounds. There are those who have studied economics and those who have not; there are those who have already invested, perhaps as a small saver, and those who have never done so.
Now, the training path is generally long and complicated. If you have the opportunity to shorten it, without compromising the final result, do it. The reference is precisely to prior knowledge. If, for example, and for any reason, you already have a smattering of knowledge about currencies,
seriously consider Forex before venturing out and practically starting from scratch on stocks.
Obviously, try to balance this criterion of prior knowledge with those we have described so far. The choice of the market, after all, is a very complex activity, however preliminary.
Conclusion and general advice
The main advice, as just mentioned, is to take into account all the criteria, occasionally giving greater weight to this or that one, based on one's needs and feelings. Finally, integrate everything with these simple tips.
Take all the time necessary. The choice of the reference market cannot and must not be a choice to be taken lightly. As we have seen, it affects the way of trading and, consistently with the characteristics of the trader, their profit hopes. Therefore, take all the time necessary and do not act in haste.
Experiment first and specialize later. The basic idea is, at least for a while, to explore more possibilities, also because only by trying it is possible to really understand
which approach one feels comfortable with. However, once the choice is made, don't go back and indeed specialize in that particular market.
Don't get involved in fashion dynamics. The risk is there. Regulating a market, or more specifically an asset class, rises to prominence and gains popularity even among the uninitiated, among non-experts. First it was the turn of Forex, now cryptocurrencies. Obviously, that of "fashion"
is not a criterion to be taken into consideration. 
