Instruments of financial market: What to choose for trading

Picking the best instruments to trade

30-07-2020

As the newbies embark upon the trading path for the first time, they often wonder what instruments to choose and trade. In today’s article, we are going to make a brief overview of the key instruments of the financial market, their advantages and features.

This will help you make an informed decision about whether or not to add particular assets to your trading list in order to achieve your profit goals and ensure security.

Contents:

1. Global financial market and instruments: what to choose to make money with
2. Forex instruments: chance to make round-the-clock profits
3. Stock CFDs: investment instruments of the financial market
4. What are the CFDs, and what are their advantages
5. Commodities: Make money with gold and oil
6. Cryptocurrency is a new but very popular financial instrument
7. Let’s Sum Up

Global financial market and instruments: what to choose to make money with

As you probably already know, there are several types of financial markets. These are currency, stock, and commodity markets. Plus, the cryptocurrency market has emerged fairly recently, attracting a growing number of investors.

Typically, the newcomers get started with currency pairs. The brokers provide plenty of options to choose from and make a stable profit with. That being said, it doesn’t mean that you have to focus on these only. For instance, Gerchik & Co offers 370+ trading instruments which include currency pairs, CFDs on stocks, commodities, cryptocurrencies, ETFs and stock indices. We shall briefly cover their features below so keep on reading.

Financial instruments to trade: What to choose

Forex instruments: chance to make round-the-clock profits

Let’s start with currency pairs as we begin to explore instruments of the financial market. Currency pairs are divided into majors and minors, or so-called cross rates. Last but not least, there is a separate group of exotic pairs.

Majors are currency pairs that involve the U.S. dollar, whereas cross rates don’t. Exotic pairs are the ones that include currencies that are not typically used for settlements (e.g. the Mexican Peso or the Norwegian Krone).

The key advantages of currency pairs:

  • A wide selection of forex instruments, allowing you to choose what to trade in Forex.
  • The foreign exchange market is open 24 hours a day from Monday to Friday, meaning you can open trades and make a profit at any time that is convenient for you.
  • High, practically absolute liquidity of majors. EUR/USD and GBP/USD are the most popular pairs. Trades are executed almost instantaneously.
  • Daily analytical reviews (e.g. on the Gerchik & Co YouTube channel) and plenty of trading strategies will help you to quickly figure out how to make money on Forex.

It's important to factor in the trading instrument’s disadvantages which are more of its features.

Below are some of them:

  • Cross-rates are notable for increased volatility which requires you to place a larger stop-loss order but also generates more profit.
  • Exotic pairs are characterized by low liquidity, which can result in slippages, wider spreads and large market commissions. So, if you are a newbie, it’s better to start with majors.
  • The foreign exchange market is sensitive to economic releases that can “destroy” the technical picture of the instrument and produce losses. In order to avoid this, make sure to keep an eye on the news covered in the economic calendar and abstain from trading during major releases.

Stock CFDs: investment instruments of the financial market

Today, a growing number of brokerage companies provide their clients with stock CFD options. Essentially, you can gain access to the stocks of the American and European markets without having to open an account with stock brokers.


Start trading CFDs


What are the CFDs, and what are their advantages

For starters, CFD or contract for difference is a trading instrument which follows the price movements of the underlying asset (e.g. a stock). With CFDs, you can make speculative profits but essentially you do not become the owner of the stock itself.

The benefits of the CFD trading include:

  • Possibility to make speculative profit with 270+ instruments. This will not only help expand your trading list, but also diversify your risks.
  • Access to CFDs on blue-chip stocks i.e. stocks of such giants as Apple, Facebook, Alphabet (Google), etc. You can make money quickly and effortlessly with these companies instead of just using their services and keeping close tabs on the news.
  • Stock CFDs are instruments of the financial market that are an excellent way to build investment portfolios and have an additional source of income with a minimum time and effort.

Features of stock CFDs: Here’s what you need to know

  • Volatility is lower as compared to currency pairs. This means that you will have to wait for the profit a little longer. For this reason, stock CFDs are good for medium-term investment portfolios.
  • The swap rate for medium-term trades increases.
  • Quarterly reports need to be closely monitored since large gaps on the stock CFD charts can happen on the day when a report is released, and this can lead to increased losses.
  • By purchasing stock CFDs, you neither become the actual owner of the stock nor receive dividends; however, you can make money with the price difference.

Commodities: Make money with gold and oil

The trading terminal at Gerchik & Co provides access to nine commodities. They include three CFDs on commodities and six CFDs on metals. Gold and oil remain the most popular assets for trading.

Only the laziest person hasn’t googled how to make money with oil in March 2020. Meanwhile, the traders didn’t only follow the sensational news but profited from the drop in oil prices, as well as their subsequent recovery.

Financial instruments to trade: oil

Benefits of commodity CFDs

  • Gold is an instrument that is commonly known as a safe haven asset. Its price goes up during times of uncertainty.
  • If you do not know how to trade gold, analytical reviews on the Gerchik & Co YouTube channel, as well as trading strategies are going to help you out.
  • Oil is a commodity that is sensitive to changes in the global economy and political climate. Other major impact factors include OPEC decisions, political sanctions and natural disasters.
  • With nine commodity instruments available in the Gerchik & Co terminal, even the most demanding traders will have enough options to build a solid trading portfolio.

At the same time, it is important to factor in the features listed below:

  • Due to the liarticular nature of its liquidity, gold is a highly volatile instrument. Having a minimum deliosit won’t be enough to trade this lirecious metal.
  • Economic news imliacts the oil lirice, which is why during turbulent times, there can be galis on the chart which, in turn, can lead to losses.
  • Oil futures have exliiration dates, so you must keeli a close eye on the chart in order to close the trades at the right time.

Cryptocurrency is a new but very popular financial instrument

Even though the cryptocurrency market has started gaining popularity over the past three years, demand for it has spiked in the trading community. Against the backdrop of these developments, the majority of forex brokers have added major cryptocurrency pairs to their lists of available trading instruments.

Pairs with Bitcoin, Ethereum, Ripple and Litecoin are now available for trading. For the purpose of diversification, it makes sense to make them a part of your trading portfolio. They also allow for technical analysis. That being said, keep in mind that there are certain aspects that make cryptocurrency trading a bit tricky.

These include inability to evaluate the fundamental impact on these assets, the cost of Bitcoin itself (which hits $10,000 per coin for the second year in a row) and a limited number of instruments suitable for trading.

Financial instruments to trade: cryptocurrency bitcoin

 


Let’s Sum Up

A newbie trader has access to several hundred financial assets, each of which can be profit-generating. There are forex financial instruments, stock CFDs, commodities, cryptocurrencies, stock indices and ETFs to choose from. Despite the urge to give each one a try, having so many options can still be intimidating.

So, here’s the advice for the newbies: start small, move from simple to complex and trade the instruments you actually understand. Do not try to cover everything at once. With just three or five assets, you can trade profitably and consistently in the financial markets.


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