Forex trading offers investors the ability to trade a huge range of assets. They are mostly used as financial instruments by investors and in reality, they do not have any physical worth. But what are they? How do they work? How many of them are available on the market? In this guide, we will try to answer every single one of these questions, so keep reading if you want to learn more!
Assets can be defined as some type of resources that have economic value. They are owned and traded by investors on the Forex market. They can be anything from currencies, to commodities, etc. The assets are different from one another in terms of volatility, liquidity, availability, complexity, and many more. Not every single one of them will work for you, but there are so many of them that it is very easy to find something that fits all of your needs.
What are the most popular trading assets?
In the world of Forex, one of the most popular assets are currencies. They are traded in pairs and while trading, you will come across three types of currency pairs. These are:
Major currency pairs are the most popular ones on the market, in the world of Forex, they represent 85 present of the total trading volume. Major currency pairs are formed between USD and other major currencies, like EUR, GBP, AUD, NZD, JPY, CHF, CAD.
Minors are currency pairs that are formed between major currencies, except for the USD. They include EUR/AUD, GBP/JPY, CHF/JPY, and many more. When it comes to exotic currency pairs, they include one major currency, like USD, and one exotic currency, like Mexican Peso, MXN. Trading exotic currency pairs are more volatile and risky than the other ones and it is also known for low liquidity.
Recently, trading commodities have become very popular. These assets include natural resources and they can be divided into three categories as well: precious metals, energy, and agriculture. Precious metals include those like gold, silver, copper, palladium, etc. Trading these are very popular mostly because of their ‘safe haven’ status, especially the gold. Even in the case of a worldwide crisis, the prices of precious metals stay very stable, which makes it very popular.
Energy trading has always been very popular. One of the most popular ones is the Crude Oil, which is the number one energy source and popular energy commodity. Natural gas, on the other hand, is becoming increasingly popular on the market. The reason behind the popularity of these energies is that the price of them can be influenced heavily by ongoing events around the world, which gives traders the ability to easily predict and trade.
Agriculture is also very popular, although not as popular as metals or energy. They include crops, livestock, food, nutrients, and many others.
Stocks are financial assets that signify the ownership of a company, they represent a claim on part of the industry’s assets and are very po[ular among investors. When a certain company divides ownership rights, they are issuing a specific number of shares, which then can be traded by investors. Stocks are especially popular during quarterly earnings seasons and economic crises.
Since the USA represents the largest economy in the world, American stocks are very popular. They include those like Apple, Amazon, Google, Facebook, Microsoft, and many others. There are many stock exchanges around the world, and the number is increasing every day.
Index means financial basket which is used to measure the performance of some type of an asset. Many investors use it to understand how their investments perform. There are many well-known indexes, like Dow Jones 30, S&P 500, Nikkei 225, and many others. The prices of indexes are affected by all factors that affect stock prices.
Although cryptocurrencies are very new to the market, they have managed to become a very popular asset. Most of the cryptocurrencies are supported by blockchain technology, which has changed many industries around the world. They are best known for low liquidity and are very risky, however, the return can also be very high Bitcoin is one of the most popular cryptocurrencies, the price of which has peaked in 2017.
Why is it important to understand assets?
Understanding assets will make your job in the world of trading a lot easier. There are many things that can be learned about them, and the market is changing every day. It is very important to try to stay up to date with these events so that you have more chance of successful trading.