The Main Differences Between Trading Markets

Before becoming traders, many people don’t realise that there are actually a lot of different markets to trade on, each one supplying access to different items and products. It’s not always entirely clear which market offers what kind of item and trading style, so here’s a brief (very simplified) breakdown of the key markets…

Forex / FX: this is the largest market. It’s essentially investments in currencies (money). You buy and sell them in pairs, and whilst currencies usually don’t fluctuate too wildly, there is the risk that you could lose everything or make a huge profit.

Binary: as the name suggests, this is a sort of “everything or nothing” option. You pick a trade, with a set payout (let’s say £1000). If your investment is a success, you get your £1000. If not, you lose your investment.

Contracts for Difference (also known as CFDs): invest in whether a price will rise or fall, but you do not own the goods or services which you invest in. Careful, though, sometimes you can lose more than your investment.

Stocks and shares: this is probably the best-known market. Your money will go towards a portion of a business (of your choice) or its stock. If it makes a profit, so do you. If it makes a loss, so do you!

Commodities: raw materials including food products and metals. These are always required and always being traded, so can be seen as a relatively popular, potential more stable, investment.

Indices: your money is invested in a country’s top companies, and you get a return if those companies are worth more when you take your money out. Conversely, you make a loss if those companies lose value.

Exchange Traded Fund (also known as ETFs): quick purchases and sales on the stock exchange, potentially in high volumes to maximise profit or loss.

Bonds: this is like a loan to a company, which they must pay back with interest (assuming they’re successful). Bonds are often considered a low-risk option.

Options: an option is a contract which conveys to its owner, the holder, the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on or before a specified date, depending on the style of the option.

In conclusion: choosing a market depends on the item, speed and style of trading you prefer. If you’re not sure what to go for, explore and learn about what’s on offer, or ask a member of the customer services team for support.