Hello, my friend, and welcome to this tutorial on Stock Market Day Trading. In this post, we answer the question “Is stock market day trading better than trading Forex or day trading the futures or the E-minis?” We go over the comparison of day trading stocks, day trading Forex, and day trading futures: the advantages and disadvantages of each. Enjoy!
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Stock Market Day Trading – Video
Hello, we are online. Hello, everybody! Barry Burns here with topdogtrading.com. While people are coming on, I’ll simply invite you to obtain my free market timing indicator.
I use this indicator to enter every trade I take, and I’ll provide it to you for free. It works with any charting system and gets you right into the cent to the pip. It’s an extremely accurate indicator. It’s like a little scalpel for trading. So, indicatorwebinar.com, I’ll give you an hour of my time and give you the indicator. Today’s topic, however, is concerning stock market day trading, and specifically, it is about which markets are truly the best for day trading. So I’m going to give you three different market options, and I do have a very strong opinion on this. I’ll share my opinion with you, and then you can make up your own mind.
Okay, so the first one is stocks. We have the title “stock market day trading,” so it only makes sense to start there. This is what a lot of people do, and there’s nothing wrong with it.
Advantages of Trading the Stock Market – A Lot of Stock Choices
That’s where I started and did that for many years. Here are some advantages. One of the big advantages of stock market day trading is that you have a lot of choices. There are a lot of companies out there, a lot of stocks to choose from, thousands and thousands and thousands. Some people like to do scans and look for big movers and all that kind of stuff, and that’s great.
That can be used very well. One of the biggest downsides that a lot of people hate about stock market day trading, especially here in the United States, is the pattern day trading rule. This rule states that you need to have $25,000 in your account to be a pattern day trader. Now the problem with that, of course, is that it’s a lot of money. Most people don’t have that size account to trade with.
And not only that, but you can’t just have $25,000 in your account. You need to have more because you’re going to have some ups and downs, some fluctuations in your account. So if you dip below that $25,000, then you have to fund the account again. So you want to give yourself a buffer, so you want to have more than that. So, anyway, I think that’s pretty obvious.
Advantages of Trading the Stock Market – Day Trading vs Swing Trading – Stock Market Day Trading
Another benefit of day trading over swing trading stocks is that you get leverage. But it’s only four to one, which is better than nothing. Now, four to one leverage is the advantage of it. With leverage, you can make more money than without leverage. You can make more money faster, and I don’t know about you, but I like to make more money faster.
Of course, it is a two-edged sword because you can also lose more money faster. So you really want to do this when you’ve already proven consistently over a large sample of data that you’re making some money. Okay, so that’s it. I’ll just move on from there. So stocks.
Why You Should Trade the FOREX Markets
Now, the second one is you can day trade Forex. When I say Forex, I mean the forex market. When most people think of Forex, they think of spot Forex. So that’s what we’ll refer to it as today because that’s what most people think of. With spot Forex, you can have a smaller trading account, and that is one of the major advantages and one of the reasons it’s popular.
So you can have a smaller trading account. Many people don’t have the $25,000. Now, what’s also great is that you can have a micro or mini lot. So you can have a really small trading account, and I think this is a pretty good idea for a lot of people who are new to trading or just transitioning from a demo or simulator account. When you make that transition, you want to keep the emotional impact of trading with real money as minimal as possible.
you want to keep the emotional impact of trading with real money as minimal as possibleBarry Burns
So starting with a micro or mini account is really good because your losses will be small and won’t have as much of a psychological effect on you. So that’s great. Another one is that you get much larger leverage. Here in the United States, I think they’ve maxed it out. They’ve actually decreased it in the last few years to 50 to 1 leverage, which is a lot of leverage.
Advantages of Trading FOREX – High Leverage
In some countries, it’s 200 to 1 or even more. But the fact that the US regulators decreased it from 200 to 1 to 50 to 1 is a lesson. They did that because it’s a double-edged sword. People could lose a lot of money so fast that the regulator stepped in to put the brakes on this. This is not good for people.
Again, not all countries have done that, but it shows us a lesson that we can get very confident and only think about the winning side. But you really need to think about the downside of leverage as well because the fact is most people lose money trading. So yes, that’s a very serious consideration. Okay, so by the way, just because they will allow you to have that kind of leverage doesn’t mean you have to take it. You can tell your broker that you only want this much leverage.
Advantages of Trading FOREX – Available 24/7
Now, another great benefit of day trading the spot Forex market is that you can trade all day, whereas with most stocks, you really can’t. Now, we do pre and post-market trading in stock market day trading for certain stocks, but there’s not as much liquidity. So with spot Forex, one of the really cool things is that you can find a currency that is trading on the other side of the world and it’s actively trading on the other side of the world. And then you can trade that when you’re off work. So big advantage, it’s really cool.
And they’re good markets. I like to trade the most active pairs, as usual with anything I like to trade markets that have a lot of volume. Okay, and then the third and last market that we’ll discuss for day trading today is really my favorite, and that’s the futures market. So it doesn’t necessarily mean it’s the best, it’s just my favorite, and I’ll tell you why. It’s got the great combination of both the advantages of stocks and Forex, but with an extra twist, and that twist is what really makes it my favorite.
Why You Should Trade the Futures Markets
First of all, you can have a smaller account, so it has the advantage of Forex over stocks because you can have a much smaller trading account, and again, that makes it more accessible to most people. Now, the thing is, the futures markets just introduced not only minis, which we’ve had before, but now micro contracts. And this is new as I’m recording this, and I think it’s a great contract. So S&P micros, for example, have a lot of volume, and again, you risk very little money. So you’re going to make less, but that’s okay when you’re first starting to trade with real money.
Again, don’t focus on making big money. That is a one-way ticket to trader’s hell. Focus on risking as little as possible because when you move from a demo account or simulator trading to real money, there’s going to be that emotional impact of “this is my real money now.” And don’t be surprised if your trading results start to get a little worse. That’s actually normal.
And that’s just getting your mind used to getting comfortable with trading real, real money, and that’s going to be easier if you’re risking less. This is the reality of trading. Don’t get overly confident. The other thing that’s great about futures is you get more leverage. You get more leverage than stocks, and you get less leverage than spot Forex.
Advantages of Trading Futures – Leverage You Get Trading Futures
Each market has its own leverage points, but let’s say around 20 to 1 on average. So still great leverage. I don’t think anyone needs more than 20 to 1 leverage. That’s my opinion. It’s still plenty of leverage to make you money fast.
It’s also plenty of leverage to make you lose money fast if you mess up. So you still need to be very careful. Now, there are fewer markets in the futures market, for example, and again, you get a look at these. So if you go to the exchange, for example, in the futures exchanges and you look at all the different contracts available, there are many, but very few of them are very liquid that I would consider day trading them. So I personally only trade six uncorrelated markets, and this is another thing I like about the futures markets.
I trade several uncorrelated Futures marketsBarry Burns
You can find these uncorrelated markets. So I’m just going to tell you, I get this question asked a lot, so I’ll trade the S&P 500, crude oil, gold, the Euro, the yen, and the 10-year note. So those are the six that I’m looking at all the time. I have four screens here: two really big ones and two smaller ones, and I just have all six of those markets up simultaneously all day, or well, all the time that I’m trading. Usually, I only day trade for two to three hours a day, so I’m watching these.
Advantages of Trading Futures – Trade Uncorrelated Markets
And you know, sometimes you’ll see the S&P not doing anything that whole day, just going sideways, but maybe crude oil is going crazy, or maybe gold, or maybe the Euro, the yen, or the bonds. So that’s why I’m looking at these six uncorrelated markets. Now, granted, they will pair and unpair, but still, as a daily practice, it’s pretty great. I usually get really good trades every day, most every single day. So that is all I need.
I don’t need hundreds of stocks to be scanning through. And by the way, scanning for day trading can be a little complicated because by the time the scan comes up and triggers, there’s already historical data there, and then you’re entering and it’s kind of hard to time your entries at the right time. So you might do it for a set of potential setups like big gaps or big moves or whatever, and then just watch it for the time you want to enter. So by the way, you get it. Here’s the big kicker.
Here’s the big twist. The advantage of futures over Forex and stock market day trading is that you get a favorable tax rate. Again, this will only help you if you’re making money, but if you’re making money, this is huge. I tell you, it’s huge. Seriously.
Advantages of Trading Futures – Favorable Tax Rate
So, man, I’ll tell you, taxes. They just take up such a big part. When you really start making money, you’ve got to strategize on how to minimize your taxes, or else taxes will be like your number one bill. So you get a favorable rule. Futures are in a larger category called 1256 contracts.
These 1256 contracts give you a 60/40 split, so 60% will be taxed at the shorter-term rates and 40% at the longer-term rates. Now, I have to be very careful with this because I am not a tax professional. I don’t know anything about taxes. I had to do a big disclaimer here. I don’t listen to anything that I say about tax advice.
This will vary from country to city to block. Yes, it’s like crazy. I moved to Los Angeles, and they said, “Welcome to Los Angeles, by the way, you didn’t pay your taxes last year.” I’m like, “What? I paid my taxes.
“Oh, you didn’t pay your taxes to the city of Los Angeles.” And I didn’t have that when I lived in Malibu. I’m like, “Oh well, thank you for the welcome anyway.” It’s just complicated, right? You call the IRS three times, you’re going to get four different answers, and even then, you’re not sure if you got one of them right.
Heads Up! Always Consult Professional Advice – Stock Market Day Trading
So talk to a tax professional. Also, by the way, this stuff changes constantly because the time I’m telling you this, this is to the best of my knowledge. If you Google it, be very careful because if you find a Google answer that is a year old, it can be outdated. That’s how quickly these tax laws change. And by the way, the government has been trying to get rid of these 1256 contracts, and so far, at least to the best of my knowledge, they have not.
So yeah, definitely don’t take my advice as plain truth. Talk to a tax professional before you make any decisions about that, but that is a potential big benefit. By the way, the difference between short-term gains and long-term gains is ginormous. It makes a big difference at the end of your year. Okay, so that’s it, my friends.
Get My Free Timing Indicator!
If you have any more questions about this, let me know. If you have any opinions, feel free to put those in as well. If you disagree, put that in. Whatever you do, make sure you go to indicatorwebinar.com so I can give you my free market timing indicator.
And by the way, I will be live, so I’m going to spend an hour of my time with you. You can ask me questions there as well. But even if you don’t, I do come back and check these posts quite often and respond. I think if you read previous posts, you’ll see that I respond to everyone, and I like the interaction and enjoy the interaction. So, oh wait a minute, we have a question right now.
Now, I could imagine that trade high price. You know what I got before you answer Trey’s question, I just remembered I put in here. Nope, I can’t see how to do it now. I put in some quizzes, but I don’t see how to do it now. Well, anyway, I will answer Trey’s question.
Q&A Session – Stock Market Day Trading
Hi Trey, do you leave overnight data on or do you trade the intraday gaps? That’s a good question, actually. Yeah, you can do it either way. Don’t you love that? It depends.
That is one of my least favorite phrases in the world. It depends, and yet here, that’s what I’m saying. But it really does. So I just, yeah, you can trade intraday gaps and there are trades that are based around intraday gaps. So if you like to trade those, then obviously you don’t want to have your overnight data on.
On the other hand, so I guess my answer is it depends on your style of trading. Gaps are significant. They are significant and it’s good to see them. So I’ll tell you what I do. I do both.
I do both. So I’ll have a chart that has tick data, so intraday I like to watch it, market it, take data, take bars, if you will. And that runs 24/5. I don’t put Sundays on there because that messes with my floor trader pivots. So 24/5, Monday through Friday.
And then I’ll have another chart that is a time bar chart. So I like 2-minute bars, whatever interval you like. And that one, I will not put pre and post-market data on so that I can see the gaps. And then I look at both of them and I take that information and put it all together. So that’s what I do.
Great question, though. Intelligent question. Yeah, you’re a smart person, Trey. So great. Hopefully, that was helpful.
Wrapping Up! – Stock Market Day Trading
Okay, everyone, well very good. Later on, and I mean, I’m doing this live today, so however many people see it later. So if you have any questions like that, type them in, any comments, any requests for future videos, by the way, we’ll have requests for future topics. I’ll be happy to address those. I’m always looking for topics and the best topics are the ones that you ask for, that you want.
So you’re welcome, Trey. My pleasure, my friend. Great. Everyone, have a great rest of the day and happy trades.
And finally, I am offering one of my favorite trade strategies called the Rubber Band Trade. Absolutely free. And I want you to go and make some money. Try before you buy, or well, actually try and never buy because there’s no charge for this trade at all. And I’ll give you the setups, the exits, all the rules for it. It’s an objective rule-based method based on price pattern action that I don’t think anyone else teaches.
I’ve never seen anything else teach this particular price structure. So go get that by clicking on the green icon in the top right-hand corner of the video there, or by clicking on the green button below, and that’ll take you to a page where you can opt-in, get the video for the rubber band trade strategy, along with some other great free tutorials, one of my little mini-courses, absolutely free, courtesy of Barry Burns here at Top Dog Trading.
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