Most of the time, Forex and CFDs are not the only assets offered by brokers. This article discusses on various types of alternative assets popularly traded in forex and CFD brokers.
Forex market exists as spot (cash) markets as well as derivatives offering Contracts for difference (CFDs). CFD traders can use margin for trading in the CFD market. It means that the broker allows investors to borrow money to increase leverage to pursue gains. As a result, traders who trade on margin CFDs are on higher leverage than other players in conventional markets.
Other than that, traders can diversify their funds into a wide range of popular CFD assets like:
Hence, there are more and more forex and CFD brokers offering such assets as an alternative opportunity to trade in other markets. Here are further descriptions on each popular alternative assets commonly found in the forex and CFD brokers:
A stock is evidence of ownership of shares issued by a corporation. It represents a share where it determines the proportion of a corporation's equity. The owner of stock will get a dividend equal to how much stock they own. Moreover, corporations issue stocks to raise funds to scale up their businesses. There are two main types of stock: common and preferred.
Common stocks are bought and sold on stock exchanges, while preferred stocks can be private sales. These transactions have to comply with government regulations meant to protect investors from fraudulent practices. Stocks can be also purchased from online stock brokers.
Historically, investing in stocks market can outperform other investments in the long term. Stockholders have the right to vote in shareholder meetings, receive dividends, and sell their shares to others.
See also: Forex Brokers Offering Stock Trading
A bond represents a loan made by a borrower (typically corporate or government) to a creditor (investors and traders). It is a fixed income instrument that can be paid with variable or fixed interest payments from the borrower. Other than that, investors will receive back the principal of the loan. Bonds are usually issued by states, sovereign governments, municipalities, and companies to finance projects or operations. They are also securitized as tradable assets.
Bond's price varies inversely with interest rates. When interest rates rise, the bond's price tends to fall. Similar to any other publicly-traded security, the bond's price fluctuates on a daily basis. It is determined by supply and demand at any given sentiment. A bondholder can sell bonds at any time in the open market. If a bondholder holds bonds to maturity, they will get the principal of the loan plus interest.
A commodity is usually used as an input in the production of goods and services. It is traded on an exchange when meets specified minimum standards, also known as a basis grade. There are only little differences between a commodity coming from one producer as compared to another producer.
For instance, a barrel of oil has a similar product character regardless of the producer. Some traditional examples of commodities including gold and other precious metals, grains, beef, oil, and natural gas. In fact, gold trading is sometimes more popular than currency trading as traders can analyze XAU/USD price directly on their platform.
See also: Forex Brokers Offering Commodity Trading
Similar to mutual funds, an exchange-traded fund (ETF) is a basket that includes a collection of securities like stocks or bonds. ETF is listed on exchanges and investors can trade ETF shares on a daily basis. ETFs often aim to track the performance of a specific index, sector, commodity, or other asset. Additionally, ETFs can be structured to follow specific investment strategies, exposing investors to different market segments and investment themes. Overall, ETFs offer flexibility and accessibility to investors seeking diversified exposure to various markets and investment opportunities.
See also: Forex Brokers Offering ETF Trading
As a new form of digital asset, cryptocurrency is distributed across a large number of computers. It depends mostly on a network and is built on Blockchain technology. As it can exist outside the control of the government, cryptocurrency's structure is decentralized. Bitcoin is the most popular example of cryptocurrencies, and its price is commonly used as a reference to the cryptocurrency market as a whole.
What are the Most Traded CFD Assets?
Traditionally, the main asset classes have been equities (stocks), fixed income (bonds), commodities, and exchange-traded funds (ETFs). However, the asset class mix has expanded to include forex and cryptocurrencies. That's why we discuss a lot of varieties in the list above.
Investors often use trading volume to confirm an asset's popularity level. Trading volume represents the total number of shares or contracts of a security that were traded during a specific period. It provides insights into a market's overall activity and popularity.
According to data from Investing, the most actively traded CFDs currently are:
- EUR/USD (Euro/US Dollar)
- Crude Oil WTI (West Texas Intermediate)
- USD/TRY (US Dollar/Turkish Lira)
These instruments attract significant trading volume and reflect the diverse range of assets investors actively engage in financial markets.
To choose the best brokers based on their instrument types, you can refer to one of the articles below: