Which futures markets should I focus on, and which should I avoid?
Ultimately, the key to fluid and reasonable price action is liquidity. As we all know, even in the deepest and most commonly traded markets there will be temporary lapses in judgment that cause pricing to enter ridiculous territory. Nonetheless, such abhorrent pricing happens far more frequently in thinly traded futures markets. As a result, traders should fight the urge to play exotic markets; instead they should stick to those with efficient price discovery.
Ideal Commodity Markets
Futures markets with attractive liquidity include Treasuries (10-year notes and 30-year bonds), Eurodollars, certain stock indices (e-mini S&P and e-mini NASDAQ), crude oil, grains (corn, wheat and soybeans), and the Euro.
Viable Commodity Markets
Commodity markets that are liquid, but should be seen as venues to trade a little more sparingly are alternative stock indices such as the S&P Midcap, the Russell 2000, the full-sized S&P and NASDAQ.
