Capital.com NewsYou have decided you are ready to enter the markets, you have done your research and understood that trading CFDs is the way you want to go. The next step is deciding which markets you should trade.
In our short guide we’ll help you discover a little more about the types of markets available for trading and include three top tips to help you choose the right one for you.
The markets
Shares
One of the most well-known markets, shares are a part ownership or interest in a company. Usually this term is heard when an investor buys or sells shares in a company outright, but this is not the only way to access the market. When trading CFDs on shares, a trader speculates on the price movement of a company’s shares by choosing Buy, if the shares are moving upward, or Sell, if the shares are losing value.
Key data to watch: news, company quarterly reports, statements by the CEO or other key figures.
Indices
Indices are the plural form of a stock market index. They track how a group of shares from an exchange performs in the market. For example, the S&P 500, also known as the US 500, tracks the top 500 companies from the NYSE and NASDAQ exchanges, with the companies included based on the market capitalisation. Generally, indices can be capitalisation-weighted or price-weighted. In trading indices, a trader is speculating on the overall health of the shares included in the index, as well as the wider economic health of the parent country.
Key data to watch: Individual company data, overall economics of the country, GDP, news
Forex
A portmanteau of two words – foreign and exchange. Forex traders speculate on the price movements of a pair of currencies compared to one another. For example, GBP/USD the United Kingdom’s pound and United States dollar pair, or EUR/JPY the euro and Japanese yen pair. The price movements of Forex pairs are affected by the economic data of each individual country in the pair and its relationship to the other.
Key data to watch: GDP data, central bank releases, news
Commodities
One of the oldest markets, commodities are primary goods that are interchangeable for other goods of the same type. For example, one bullion of gold is equal to any other. Commodities are bought and sold in units such as pounds (coffee), troy ounces (gold) or barrels (oil). With four main types of commodities to choose from agricultural (wheat, coffee, sugar etc.), livestock (cattle, hogs etc.), metals (gold, platinum, rare earth metals, etc.) and energy (crude oil, natural gas, etc.) CFD traders are able to access markets that were previously reserved for investors able to take the purchase of such goods, organise their storage and of course have the liquidity to enter such a market.