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Tradable Assets in CFD Trading

As we explained in the previous lesson, CFD trading means betting on the price fluctuation of an asset without owning the asset itself. 

This no-ownership characteristic of CFD trading offers you the opportunity to profit from multiple markets. So, what can you trade as CFDs? 

1. Shares

CFDs provide exposure to individual companies listed on stock exchanges around the world, such as well-known companies like Apple, Microsoft, and Google. 

You can speculate on the price movements of these shares, profiting if their value increases and vice versa. Again, without owning any actual shares in the company. 

Some popular stock exchanges are:

• New York Stock Exchange (NYSE)

• Nasdaq (National Association of Securities Dealers Automated Quotations Stock Market)

• Euronext

• Shanghai Stock Exchange

2. Indices

An index is a collection of stocks that represents the performance of a specific market sector or geographic region. It serves as a benchmark to measure the overall trends and health of that market or sector.

For instance, the FTSE 100 tracks the performance of the top 100 companies listed on the London Stock Exchange. When you trade indices as CFDs, you're essentially speculating on the overall performance of that particular market segment.

Another example is the S&P 500 Index, which tracks the performance of 500 large-cap U.S. companies. By trading S&P 500 CFDs, you can gain exposure to the overall health of the U.S. stock market. 

Then, when you see the economy doing well, based on solid GDP growth, for example, you can choose to go long on S&P 500 CFDs. This means buying these CFDs and selling them when their price increases. 

3. Commodities

Commodities are raw materials or primary agricultural products that can be bought and sold. These commodities include precious metals, energy products, and agricultural products such as wheat. 

Given the high demand for commodities and the movement of their prices, many traders trade commodities through contracts for difference (CFD). This way, they don't have to deal with the hassle of owning the commodity itself.

4. Forex

Forex, or foreign exchange, involves trading currency pairs in the global marketplace. In the forex market, currencies are traded in pairs, where one currency is quoted against the other. 

For example, you’d see a currency pair in the forex market like this: EUR/USD=1.09. This means you would need 1.09 US dollars to buy 1 Euro. 1.09 signifies the exchange rate. 

There are multiple tradable currency pairs, and their exchange rates often vary, which is why many traders trade forex through CFDs. If you’re not familiar with Forex trading, we have an introductory course on Forex trading. 

5. Cryptocurrencies

The growing popularity of digital currencies like Bitcoin and Ethereum has opened the door to trading them through CFDs. This allows you to speculate on the price movements of these cryptocurrencies, which are known for their high volatility.

Cryptocurrency CFDs offer flexibility and liquidity, allowing you to capitalize on the high volatility of the crypto market without directly owning the underlying assets.

Conclusion

To sum up, given the nature of contracts for difference and the flexibility of not owning tradable assets, you can trade CFDs in different markets. 

Many traders opt for CFD trading as it gives them the opportunity to diversify their portfolios. 

But, before jumping head-first into trading your first CFD, it is important to learn more about the legal and regulatory aspects of it which we’ll cover in the next lesson. 

Lesson Summary

• CFD trading allows speculation on various asset classes, including stocks, indices, commodities, forex, and cryptocurrencies, without owning them.

• Stock and index CFDs enable exposure to major financial markets, while forex CFDs involve currency pairs with different volatility levels.

• Commodity CFDs provide access to raw materials like metals, energy, and agriculture, while cryptocurrency CFDs offer high-risk, high-reward opportunities.

• Understanding market factors, trading hours, and regulatory considerations is essential before trading CFDs.