Many people are attracted to CFD trading because there are so many different types of assets you can use in your trades. Each asset has its own characteristics, challenges and factors that impact its value. Some are physical items while others are just virtual. Learning about the different CFD Assets is a key part of building your trading strategy and to see where you will make money.
Assets are divided into four basic types or classes:
2. Currency pairs
In order to trade with them, it is important to know a little about each, how they work and what can affect their value.
Commodities are natural resources that come from the earth and are further grouped into two types – hard and soft commodities:
· Hard commodities are extracted from the ground including crude oil, mineral ores and precious metals.
· Soft commodities are grown or reared and include agricultural resources such as sugar and wheat as well as animal products.
Negative news such as geopolitical stories, adverse weather conditions and natural disasters can all have an impact on these assets and therefore the price of them.
Currency pairs trading is known as Forex (foreign exchange) trading and involves many major currencies such as the Euro, Dollar and GB Pound as well as lesser known currencies. The big, popular currency pairs such as EUR/USD or USD/JPY are known as major pairs while there are also minor currency pairs and exotics. Prices of currency are constantly fluctuating, and this makes for a massive trading opportunity.
Indices are used to value a section of a stock market using statistical measurements. A market index is made up of a range of stocks within a section of the economy or in a location. Examples include the Dow Jones Industrial Average, the NASDAQ, the FTSE 100 and the Nikkei 225. There are also indices which measure the state of the oil and gas industry featuring major oil and gas companies.
Stocks (also known as equity) are financial securities, offered by owners of a company, that give the holder of the stock certain rights and benefits within the company. It might mean a share of profits and voting rights on big decisions.
With the advancement of online trading platforms, it is now possible for almost anyone to buy shares in a company. Stocks are the most well-known type of asset, the one that non-traders will be most familiar with. It is also the oldest market established today. When you use stocks for CFD trading, you can make a profit from the movement in the value of the share without needing to own the entire asset.
Choosing your asset
When you first start CFD trading, you need two things – to decide which asset you will trade with and to find a safe and secure platform, such as Olsson Capital, which to conduct your trades. When it comes to choosing an asset, it is best to choose just one type and work with it for some time.
Each asset class can be influenced by different factors and react differently to world events; it is important to focus on just one and learn it well. You don’t want to spread yourself around various assets and find you can’t keep track of what will affect what. Once you have mastered one asset, then you can look to broaden your horizons and start to learn something new, to further increase your chance of good profits from your trades.
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