One of the key benefits of trading CFDs is the fact that there is a wide range of underlying assets to trade. When we trade in the financial markets, we are dealing with a specific asset that has its own characteristics. For example, they can be currencies, stocks or even commodities, such as crude oil or wheat. It can also be assets that only exist virtually such as market indices. In any case, the type of assets traded is of little consequence, as the principle of trading CFDs remains the same. Profits are made only when you correctly determine the direction of the price movements and the number of profits earned depends on the CFD’s opening and closing price.
CFDs Assets Types
Normally, most CFDs brokers will offer their clients the following asset classes:
- Currency Pairs
Depending on the broker, the selection of currency pairs usually includes all the majors such as the EUR/USD, EUR/USD and USD/JPY. Some brokers like Wilkins, extend their coverage of the forex markets to include minor currency pairs and exotics as well. The key advantage of trading currency pairs is the fact these assets are highly volatile and their prices are constantly fluctuating. With the constant movement in prices, this gives a CFD trader unlimited trading opportunities.
Commodities are defined as natural resources from the earth. They are grouped into two categories, hard commodities and soft commodities. Hard commodities are resources which have to be extracted from the ground such as crude oil and mineral ores. Soft commodities refer to agricultural resources such as crops and livestock. In short, commodities are assets which the world needs every day to function. They are used as inputs in the production process and they permeate every aspect of our lives. This the key reason why any negative news such as geopolitical news, adverse weather conditions and natural calamities that can affect the production of these commodities, will have a strong effect on the prices of commodities.
Indices are a statistical measure of the value of a section of the stock market. The constituents of a market index usually comprise of stocks of companies, which are regarded as representatives of a section of the economy. For example, the index which measures the health of the oil and gas industry will comprise of the stocks of the major oil and gas companies in the industry. Popular Market indices, which are often traded by CFD traders include the Dow Jones Industrial Average, S&P500, NASDAQ, Nikkei 225, FTSE 100 and DAX.
Equity or stocks are financial securities that give their owners the rights and benefits of ownership in a company. Now with the advancement of online trading technologies, it is possible for anyone to buy stocks online, through an online trading platform. Among all the asset classes listed here, stocks represent an asset which almost everyone is familiar with. It is the oldest established market among all the markets that we have today. With CFDs, you not only have the ability to profit from the price movements of stocks but also from stock splits and dividends paid out to the stockholders. In addition, with CFDs, you have the ability to leverage your trades, unlike when you trade with physical stocks.