Choosing The Best Futures Market for Day Trading

This post may contain affiliate links. By purchasing products through these links, I may earn a small commission at no additional cost to you. In addition, any charts for financial instruments in this article are for education only. The examples shown here do not constitute trading advice or a solicitation to buy or sell any financial instrument. Past performance is not necessarily an indication of future performance.
If you would like to learn more, please read this Disclaimer for details.

Day trading futures can provide a plethora of opportunities for traders. However, not every market is created equally. Some futures markets are hectic and volatile, which is actually good for day trading. Others slow down to a crawl more often than not, providing limited or no good opportunities for strong trends. Some are seasonal, while others remain consistent through the year. How do you know which futures market is the best?

Depending on how actively you want to trade, you may choose a different market than one of these. When I trade, however, I want something that provides endless opportunities. Not only does this mean more reliable profitability, but I found that I get the most effective and efficient practice from these kinds of markets. I don’t want months of slower trends or years where I consider switching to a different market or a different strategy.

There aren’t a ton of futures markets compared to different stocks. But this approach filters quite a lot of them out nonetheless, leaving only the best.

If your strategy is already well-defined, it will work fine in any good futures market. But depending on your time zone and schedule, you may opt for a market that is more convenient for you.

The Different Types of Futures Markets

Before we can pick a single market, you have several categories to choose from.

Stock Index Futures

Stock index futures are among the most popular markets for day traders. These futures contracts allow traders to gain exposure to the performance of a specific stock index, such as the S&P 500, Dow Jones Industrial Average, and NASDAQ-100. The high liquidity and volatility of these markets make them ideal for day trading.

S&P 500 (ES): The E-mini S&P 500 is the most liquid and widely traded stock index futures contract. It tracks the performance of the S&P 500 Index, which consists of the 500 largest U.S. publicly traded companies.

NASDAQ-100 (NQ): The E-mini NASDAQ-100 futures contract tracks the performance of the NASDAQ-100 Index, which consists of the 100 largest non-financial companies listed on the NASDAQ stock exchange. This market is particularly popular among traders interested in technology stocks, and is my favorite for numerous reasons.

Dow Jones Industrial Average (YM): The E-mini Dow Jones tracks the performance of the 30 largest U.S. publicly traded companies. It offers a smaller contract size compared to the S&P 500, making it more accessible to retail traders.

Commodity Futures

Commodity futures markets can provide significant day trading opportunities due to their volatility and sensitivity to various supply and demand factors.

Some commodities markets which offer futures contracts include the following.

Crude Oil (CL): Crude oil is one of the most actively traded commodity futures. Its price is influenced by geopolitical events, changes in production levels, and global economic growth. The high volatility of crude oil prices makes it an attractive market for day traders.

Gold (GC): Gold is a popular market for day traders due to its status as a safe-haven asset and its sensitivity to macroeconomic factors, such as interest rates and currency movements. Gold futures can exhibit significant price swings, providing ample opportunities for day trading.

Natural Gas (NG): Natural gas futures are known for their seasonal price fluctuations and sensitivity to weather conditions, making them a popular choice for day traders looking to capitalize on short-term price movements.

Currency Futures

Currency futures provide exposure to the foreign exchange (forex) market, allowing traders to speculate on the value of one currency against another. These markets are characterized by high liquidity and 24-hour trading.

Euro (6E): The Euro futures contract is among the most liquid currency futures, offering exposure to the value of the euro against the U.S. dollar. This market is particularly sensitive to economic data releases and monetary policy decisions from the European Central Bank and the U.S. Federal Reserve.

Japanese Yen (6J): The Japanese Yen futures contract tracks the value of the Japanese yen against the U.S. dollar. This market is popular among traders due to its high liquidity and sensitivity to Japanese economic data, as well as global risk sentiment.

Interest Rate Futures

Interest rate futures are derivatives that allow traders to speculate on the future direction of interest rates. These markets are influenced by central bank policies, economic data releases, and global macroeconomic trends.

U.S. Treasury Bonds (ZB, ZN, ZF): U.S. Treasury bond futures offer exposure to the U.S. government bond market, with contracts available for various maturities (e.g., 30-year, 10-year, and 5-year). These markets are highly liquid and are sensitive to changes in interest rates, making them suitable for day trading.

Eurodollar Futures (GE): Eurodollar futures are short-term interest rate contracts that track the 3-month London Interbank Offered Rate (LIBOR) for U.S. dollar deposits. These contracts are widely used to hedge interest rate risk and are popular among day traders due to their high liquidity and sensitivity to central bank policies and economic data releases.

Crypto Futures

Crypto futures are relatively new to the futures market, but they have rapidly gained popularity due to the significant growth and volatility of the cryptocurrency sector. These futures allow traders to speculate on the future price movements of cryptocurrencies like Bitcoin and Ethereum without directly owning the underlying assets. Trading crypto futures can offer opportunities for both experienced and novice traders who want to profit from the market’s volatility.

Bitcoin Futures (BTC): Bitcoin futures were the first cryptocurrency futures to be introduced to the market. These contracts are offered by major exchanges like the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE). Bitcoin futures provide traders with exposure to the most well-known and widely traded cryptocurrency.

Ethereum Futures (ETH): Ethereum futures allow traders to speculate on the future price of Ethereum, the second-largest cryptocurrency by market capitalization. Ethereum’s underlying technology, the Ethereum blockchain, powers a wide range of decentralized applications and financial services, making it a popular choice for traders interested in the broader cryptocurrency market.

What Separates The Best Futures Markets From the Rest

When I experimented with different markets, I looked for a few things: volatility, liquidity, and consistency.

Futures markets that are volatile provide larger trends, which means larger profits. In addition, it becomes easier to read market behavior when trends are clear and well-defined.

When it comes to having the right liquidity, smaller traders may not notice the difference at first. But if you ever hope to trade large size, the wrong level of liquidity could dramatically alter your performance as you scale up. The right markets will allow you to enter and exit at will, losing maybe a tick or two even during active trends.

Finally, we want to see consistency. As master traders, we need to be consistent. It’s only right that we aim for a market that provides consistent opportunity, or it makes our job significantly more difficult. Consistent markets offer constant trends and are not seasonal or questionable in terms of their activity at any time during the year or during certain years.

My Top 5 Futures Markets

Here’s a chart I put together. To get some of these estimations, I checked each market for a standard 5 minute, 1 hour, and 4 hour trend. I compared the size of the moves generated during the same period of time on the same trends, because several markets tend to move together during strong trends.

Naturally, this information is limited and requires more context to make any specific trading decisions, but it may help in your selection process nonetheless.

Average Daily VolumeTick SizeProfit (per tick)Average Spread (ticks)Daily Fluctuation (points/pips)Profit (average trend)Average Margin Requirement
ES1,500,0000.25$12.501-250-100$400-2500$1000
NQ700,0000.25$52-4100-200$600-3500$1500
YM140,0001$51-3100-200$500-2000$500
CL1,000,0000.01$101-2100-250$700-2000$2000
GC300,0000.10$101-2100-300$600-2000$1500
6E150,0000.00005$6.252-450-100 (pips)$180-700$500
6J100,0000.0000005$6.252-440-80 (pips)$80-300$500

NASDAQ-100 (NQ)

The NQ futures market is, in my opinion, the best market for day trading, by far. Not only are trends incredibly volatile and consistent, but the liquidity just feels better than other markets, including the S&P 500.

Having traded both, I quickly realized the advantages that retail traders have in the NQ compared to S&P. I will highlight these differences in a separate article, but it’s something you should experience yourself by trading both, preferably during the same moves, and comparing the way price moves.

Dow Jones Industrial Average (YM)

I don’t trade the YM, but I knew someone who traded it a lot. After spending some time observing its moves and analyzing trends together, I began to see its appeal. However, I don’t know other people who trade it as often, so it is one of the more underrated picks. Its volume is significantly lower than the NQ and ES markets.

I consider the YM slightly better than the ES, from my observations at least. Its volume might be only 1/10th of what traders move in ES each day, but the liquidity and trend size looks much better to me.

Crude Oil (CL)

Crude Oil was all I watched when I first started trading futures. It was my favorite market for a long time, despite being extremely difficult for a beginner. Price swings rapidly, even when it is irrelevant to the real moves. This is a characteristic of any truly volatile and active market, but oil just seemed harder, looking back on some of my experiences from earlier years.

However, I can’t put it on the same level as NQ, and perhaps some others even. Over the last few years, especially, the day trading potential seems to have become more limited. The market will move significantly day to day, but back in 2015-2017, it used to move a lot smoother.

It’s still quite active today, significantly more than just about every other top pick, but in my opinion it is a toss up between CL and the next two markets.

S&P 500 (ES)

I can’t completely leave off the ES, because it’s the most traded futures market in the world.

My issues with the ES primarily stem from the way price moves in a slower, block-like way. The size of open orders is so staggering, that it takes a significant amount of volume for the price to move even one tick.

If it’s trending and you’re in early, it will certainly provide similar profits to any of the better futures markets. But in my experience, it’s just not as “smooth” as something like the NQ. With that said, however, if you ever plan to scale up to something like 25 or 50 contracts, ES will take it without flinching.

Gold (GC)

Gold is not the most active market when it comes to day trading. Sometimes, trends simply get stuck, similar to Crude Oil at times. However, it’s still active enough to offer something good just about every single day.

I don’t trade gold much, and never really did get into it more actively, but I see that it has enough potential. I’ve taken advantage numerous times if I happened to see a setup in between my other trades.

Honorable Mentions: Euro (6E) and Japanese Yen (6J)

I don’t trade currency futures, but I’ve looked at these some more in recent years. I think they’ve always been viable for day trading, but their profitability was so much less in terms of magnitude, that I didn’t see the point. However, as the US stock indexes have broken record levels year after year over the last 5-10 years, the required margins have gone up substantially as a result.

If this trend continues, which it likely will, these currency futures may become more worthwhile due to their lower margin costs. This will only be a consideration for newer traders, who want to trade with a smaller account.

Banner of OneUpTrader for traders to try the evaluation program.

If you’re looking for an alternative to funding your own account, however, funded futures accounts are a great option now.

As margins continue to go up, it seems likely that more traders will end up choosing this route, as it completely eliminates the need for monitoring one’s account balance according to the constantly fluctuating margin requirements. Companies like TopStepTrader, OneUp Trader, UProfit Trader, and more have done something to help resolve this issue.

Conclusion

The best futures markets for day trading are those that offer high liquidity, volatility, and consistency for long-term reliability. Switching markets frequently is something I don’t like doing, and don’t recommend. Do your best to master your technique by trading one or two markets first.

To avoid getting any sort of bias for a single market, though, you can definitely switch between any of the markets covered above. A master trader will make the most of any of these markets, because they don’t have any real drawbacks until you’re comparing them with one another.

The Russell is also quite popular, and may deserve coverage in its own post at some point. But for now, these 5-7 markets should do. Feel free to share any other futures markets you prefer to trade, and what makes them work for you!

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *