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Most common assets traded in Forex and CFD markets

Most common assets traded in Forex and CFD markets

Forex & CFD markets provide traders the opportunity to trade a wide range of assets. These assets are traded as financial instruments by forex traders, investors, individuals, banks, and many other market participants and actually don’t have an inherent physical worth. This means that traders have no ownership of the underlying asset. Assets exist in classes which are made up of different securities that exhibit similar characteristics and fluctuation in prices. Major examples of assets traded in these markets are as follows.

Commodities

Commodities are financial assets which are basically bought and sold through future contracts in the Forex or the CFD market. They are traded based on exchanges that standardize the quality and quantity of any commodity being traded. Essentially, commodities are raw materials that are sold in bulk and are mostly used in the production of other goods and services. In the CFD market, commodity trading is a good method of speculating on the financial market.

There are basically two methods through which commodities can be traded. These methods include the cash and forward commodity trading methods. The Cash settled commodities consist of a settlement date that is typically in the near future, while the forward settled commodities consist of a settlement date in the far future. The most popularly traded commodities in the CFD and Forex markets are energies (major oils and natural gas), precious metals (like gold, silver, and copper) and soft commodities of agricultural origin (like cocoa, coffee, and sugar and wheat).

 Energies

These set of commodities has the largest impact on the global economy. Examples of tradable energies include crude oil and natural gas. Crude oil is used as an energy for transportation in different cars, trains, jets, and ships. It is also used in the production of other goods and services like plastics, synthetic textiles, fertilizers, computers, and cosmetics. On the other hand, natural gases are used in manufacturing industries for production purposes. It is also used in residential and commercial production and electricity generation.

 Precious Metals

Gold, silver, and copper are regarded as scarce commodities which are traded in the Forex and CFD markets. There is a large demand for these commodities by speculation. Gold is seen as an alternative to paper money and its price moves in opposite direction to the USD currency. Gold as a commodity is used in the production of jewelry and some electrons. Copper, on the other hand, is used for industrial production and building infrastructures.

 Agricultural Commodities

Agricultural products are either meant to be used, traded for goods or speculated upon when it comes to the Forex and CFD market. This set of commodity is placed as soft commodities which include a good number of agricultural products like cocoa, sugar, wheat, and coffee.

Currencies

Currencies are traded in pairs in such a way that the increase in the value of a currency in a pair leads to a decrease in value of the other. Traders in the Forex and CFD market trade currencies by speculations on buying when the value of a currency increases and selling when the value decreases thereby making returns. There are majorly three classes of currency pairs that exist. The first is the major currency pair which is made up of EUR/USD Euro and United States, USD/JPY United States and Japan, GBP/USD United Kingdom and United States, USD/CAD United States and Canada, USD/CHF United States dollar and Switzerland, AUD/USD Australia and United States, NZD/USD New Zealand and United States. Minor currency pairs include EUR/GBP, EUR/CHF, EUR/CAD, EUR/ AUD, EUR/NZD, EUR/JPY, GBP/JPY, CHF/JPY, CAD/JPY, AUD/JPY, NZD/JPY, GBP/CHF, GBP/AUD, GBP/CAD. The exotic pairs include EUR/TRY, USD/SEK, USD/NWK, USD/DKK, USD/ZAR, USD/HKD, USD/ SGD.

Cryptocurrencies

Forex and CFD traders make profits from a wide range of tradable cryptocurrencies. These cryptocurrencies are digital currencies which uses cryptography as security. Cryptocurrencies are virtual currencies that have no attribute of a physical currency and every performed transaction is seen as numbers moving from one digital holder to another. A blockchain is the decentralized control panel of every cryptocurrency and viewed as a public transaction database that functions as a distributed journal. Unlike other physical currencies that are being maintained by central banks, cryptocurrencies are maintained in a blockchain by algorithms. Examples include Bitcoin, Ethereum, Ripple, Litecoin, and Dash.

Stocks

Stocks are financial assets that signify ownership of a company. Stock generally represents a claim on part of an industry’s assets and earnings. There exist two main types of stocks in the equity market. The common stock gives its owner the ability to vote at a shareholders meetings in addition to receiving a dividend and the preferred stock which doesn’t convey any voting right to shareholders. Tradable stocks are usually offered at different stock exchanges by large companies and corporations such as Amazon, Facebook, Ford Motor, General Electric, Intel, Wells Fargo etc.

ETFs

Exchange traded funds are financial investment funds that function by tracking broad-based or sector indexes, commodities and a wide range of assets. ETFs are traded in the Forex and CFD market just like stocks and can be sold short by traders and bought on margin. ETFs have a dynamic nature, they tend to fluctuate through each trading season with respect to market events and traders activities. Examples of traded ETFs include SPDR S&P 500, MSCI Emerging Markets Index Fund, S&P 500 VIX Short-Term Futures ETN, Financial Select Sector SPDR, Russell 2000 Index Fund, MSCI Japan Index Fund, and Power Shares QQQ Trust.

Treasury bonds and notes

Bonds and notes are fixed-income assets which include money loans the government or a corporate institution gets from a trader or investor for a specific period of time with an attached variable or fixed interest rate. These treasuries are seen as a medium of fund generation by the government, states or companies in order to finance major projects and activities. In the forex and CFD markets, traders usually sell and buy debt securities. Bonds are issued with maturity from 10 to 30 years while treasury notes are issued with maturity from 2 to 10 years.