7 most appealing markets for online trading
An overview of 7 online trading markets 23 Oct
Online trading is a convenient way for traders to access different markets and trading methods. In fact, the arrival of online trading, followed by access to users shared content led to new forms of trading, notably social and automated trading.
What are some of the appealing markets for online traders, and what does the trading look like in these different markets? Those are the questions we will cover in our article today.
What are some of the most appealing markets for online traders?
An index is a group of stocks representing the performance of an economy, market or sector. The index's value is based on the value of the underlying stocks, which is usually calculated based on a weighted average.
Trading indices has been a popular choice among traders for a long time. They can choose to initiate long or short positions depending on their outlook for the index they trade. In the US, the Dow Jones Industrial Average or DJIA and the S&P 500 index are popular choices with the latter being the most representative of the condition of the US stock market.
Indices can be very volatile depending on the economy or the type of stocks they track, for instance an index tracking small caps will typically be more volatile that one tracking larger caps.
The indices are also impacted by geopolitical events, economic reports as so on, therefore traders need to be aware of such events as they can largely impact the value of an index. Some of the most popular Indices are the DAX 30, CAC 40, Nikkei 225, NASDAQ 100, STOXX 50 and NIFTY 50.
Online forex trading, also referred to as FX is buying and selling currency pairs in the global Foreign exchange market. It is a decentralized, highly liquid and volatile international market.
Trading in the Forex market could be very lucrative if traders have the right tools to profit from currencies price movements. Such tools start with selecting the proper broker account, with trading platforms allowing traders to automate trades to benefit from the 24 hours price movement in this busy market.
Government Bonds Trading
Government bonds, securities or treasuries are debt obligations issued by the government. They are considered as low risk investments and safe haven assets because of the low risk of governments defaulting.
Treasuries include T-bills, T-bonds and Treasury inflation-protected securities or TIPS.
Government bonds are not very volatile but will move based on political events and inflation outlook. Treasuries and bonds markets are very liquid and because of the low risk, their returns are rather low.
Among the popular bonds traders can speculate on are the 5, 10 and 30 Year US T-Bonds, the Japan Government Bond and the Euro-Bund.
Contract for difference or CFDs are derivatives that were introduced to traders in the late 90's. CFD's allow traders to speculate on the price movement of the underlying asset without the need to own the asset itself.
CFD's paired with the proper leverage can help traders maximize profits while using very little capital. Platforms such as Metatrader allow traders to initiate both short and long positions.
There are many reasons why CFDs are very popular amongst online traders, one of them also being the ability to use CFDs to hedge one's portfolio with very little capital. This is a particularly useful option in times of high market volatility.
Exchange-traded fund or ETFs are investment funds that are traded on the stock market in a way like how stocks are traded. You can think of it as shares in a mutual fund that could be day traded like stocks. ETFs hold assets in specific commodities markets or industry sectors and can amplify the performance of the underlying assets.
The most popular ETFs like Direxion's JNUG (Junior miners) can be extremely liquid and very volatile. ETFs are lucrative but very risky derivatives as traders need to take decay into consideration. The leverage and decay makes them perfect vehicles for day trading but very risky derivatives when held for longer horizons.
Depending on the underlying assets, ETFs can react to news, political events and economic reports. Traders need to be aware of the factors that could impact the underlying sector or, index or economy the ETF is tracking.
Commodities have been traded around the world for a long time. Nowadays, commodities are traded in both a physical and derivative form around the world. There are two types of commodities: Soft commodities such as agricultural products and hard commodities such as precious metals and mined goods.
Trading commodities is done by contracts that include forwards, futures, spot prices, options on futures, CFDs and ETFs. Commodities trading in impacted by supply and demand in general.
Some commodities such as Gold and Silver can be influenced by the global events and inflation as investors tend to use them as a hedge against inflation.
Cryptocurrencies are the newest addition to most traders' portfolios. They are digital currencies that could be traded 24 hours 7 days a week. They are typically very volatile, highly liquid and react rather sharply to technological news impacting the sector.
Cryptocurrencies such as Bitcoin, Ethereum and Litecoin can be traded in pairs. Social and automated trading is available for this very volatile and profitable market.