If traders want to make money, they need to go where the opportunity is.
Try to trade in a market that doesn’t move, and you likely won’t make much money. But if you identify where the market moves are happening, and go where the most opportunity is, you can make big profits.
So how do you know which markets are the best to trade right now?
I’m going to give you the answer It’s quite easy!
In this article, we’re going to look at 4 of the most popular market sectors – Indexes, Energies, Metals and Currencies.
I’ll share how I do my analysis to clarify which market to focus on right now (and how you can do it too if you want!).
The 3-step Process
The good news is the process is quite simple.
First, we start with the question – “what would happen if we buy or sell the market every single day? “
If you look at the markets from this very simple angle, you can learn a lot about each market, and we can execute the research with this in mind.
So, what’s the process?
- First, I downloaded 15 years of daily data for every market in each sector into an Excel spreadsheet.
- For each market, I calculated the relationship on a daily data between the open and the close to find the daily movement on each market.
- Then I combined these markets together to create an average for the entire sector.
I also did the same 3-step process for the most recent three years of daily data. I’ll explain why in a moment.
Let’s talk about the results and how this can help you pick the right market category to trade in right now.
The table below shows the average trade (daily open to close) for each market category for the past 15 years.
One of the things this average tells us is the volatility of each market sector.
This is very important because if you want to make money, you need to trade markets with volatility/ There’s very little money to be made in markets where’s there’s no volatility. But if we have markets with sufficient volatility, it is way easier to trade these markets and make profits.
For simplicity, I plotted this just for the long side, however it doesn’t really matter whether it’s long or short to see what the average movement is – this will show us whether the sector has a long or short bias.
So, what can we discover from these results?
- Currencies – the very lowest movement we have over all 4 market groups are currencies. Personally, I’m quite surprised so many traders concentrate on Forex because through my analysis this is the least volatile market. We want to be where the movement is, and currencies do not show enough movement to make a lot of money.
- Energies – over the long term, Energies have been more biased to the short side,
- Indexes – we know that historically are very, very bullish.
- Metals – the average trade on this during 15 years on daily data for this category, it’s pretty good, but it’s not as high as indexes or energies.
In this case, we can determine that based on the 15-year view, we should focus on energies or indexes. This is where we have the most opportunity, this is where the action is.
However, this is the big picture.
We also want to take a closer look at the market over the most recent period. That’s why I always analyze the past three years to see if there are any significant changes, and confirm the long-term results are still valid (or not).
Here are the results for the past 3 years:
This is interesting to see how the markets have changed recently.
- Currencies – a little bit more volatile over the last three years.
- Energies – profoundly more volatile as well from -$14 to $76. We can see that Energies is where the action is. This is where the money is, the place where there are big movements, and we can make a lot of money.
- Metals – we also have quite a good increase in Medals from $3.14 to $4.62. But again, not that much of a big improvement compared to Currencies or Energies, so we have better alternatives.
- Indexes – This is the most interesting part as the Indexes are now close to zero. Now, it doesn’t mean that the volatility is gone completely – it just means that after a long bull trend, we have had a lot of bearish days. We’re in a bear trend right now, we’re in a down trend, so that’s reflected in this number. And it doesn’t mean that indexes wouldn’t be good anymore. I think that indexes are still a great option. But overall, if you’ve been trading indexes on the long side, this number is saying there is something shifting.
The best market to trade right now
The most important point to note in this research is the increase in the Energy sector.
Yes, we switched from an overall long-term down trend to a more recent up trend, especially in the last three years. The point is the volatility is there.
The volatility is in Energies.
The opportunity is in Energies.
So right now, if I wanted to make as much money as possible, I would focus on the Energy markets.
Energy markets are very, very good for breakout trading. You can create terrific breakout strategies in Energies because the markets move.
For example, this breakout trading strategy from our Hedge Fund database is on Natural Gas. This strategy trades both long and short sides.
You can see it has been very profitable during the last 10 years, producing about $10,000 per year on one contract.
In general, you will get better strategies than this and you will also get worse strategies. This is just an arbitrary example, but it’s a good example that strategies on energies are profitable, and it’s worth focusing on them.
Energy strategies can be a little bit tricky too. They can be really volatile.
They can have big losing periods and it can be super frustrating.
So, with this volatility, you can have a lot of ups, downs, and sideways periods, which can be a little nerve-wracking but overall, the profit is still in Energies.
If you cannot afford to trade them, think about micro futures instead.
By the way, this example comes from the book, the Breakout Trading Revolution where I share way more strategies.
I also share my breakout trading formula, which helped me to develop this particular strategy.
The best market to trade right now, and probably for years to come, would be Energies if you’re after profits and don’t mind a little bit more heat and volatility.
I encourage you to start working on your first Natural Gas, Crude Oil or any other Energy sector strategy as soon as possible.
Because if you start right now, remember a year from now, you might wish you had started today. And that’s always very important to remember. So do not procrastinate.
Focus on these markets and try to develop a strategy in energies as soon as possible.
It will never, never be a bad choice in your portfolio.
My second favourite choice would be indexes. Indexes are still the most popular market category, and that’s what I’m going to talk about for the entire next month of November.
November is Index Mastery month, with lots of data, charts, and alot of interesting mind-blowing stuff that will help you tremendously to improve your index breakout strategies.
Make sure you subscribe to the BTA youtube channel so you don’t miss it.
Watch the replay
Want to know the best markets to trade right now? Then check this…
Algorithmic breakout trading specialists Tomas Nesnidal and Andrew Swanscott discuss “How To Find The Best Market To Trade Right Now”, including:
- Why market selection is so important,
- How to find the market with the most opportunity,
- Changes in index markets,
- The best market to trade right now,
- Plus much more.
Why market selection is so important [00:00]
How to find the market with the most opportunity [01:40]
Big picture analysis of futures markets over 15 years [04:20]\
Current market opportunities [08:50]
Changes in index markets [10:10]
The best market to trade right now [12:20]
Example trading strategies [13:20]
The top 2 markets to trade right now [15:00]
Index Mastery month [16:45]
Released: October 18, 2022