What is a financial asset?

A financial asset includes stocks, bonds, currencies and commodities and is exchanged on the financial market. Financial assets can be owned with the aim of trying to obtain a profit when sold or bought.

Forex

Forex trading is the exchange of currency into another. The currency market is the world’s most traded financial market, its main participants are companies, banks and individual traders. According to the BIS Triennial Central Bank Survey, the trading volume in the FX market reached $6.6 trillion per day, recorded last in April 2019.

Many traders prefer the FX market due to frequent price fluctuations, making it volatile. This volatility makes the FX market attractive to traders as there is a chance of increased profits. However, when trading CFDs while there is a chance of profits there is also a chance of magnified losses due to trading on margin. To find out more about CFDs and how to minimise CFD trading risk read our guide.

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Indices

An index measures the price performance of a group of stocks. There are two types of indices, one that covers the broad market performance within the country, such as the FTSE 100 which is 100 of the largest UK stocks featured on the London Stock Exchange. There are also specific indexes tracking a particular sector such as the NASDAQ which tracks the largest US tech companies. Indices are also a great indicator of economic health in a country and can be used to measure economic data including interest rates or manufacturing output.

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Commodities

Trading commodities involves the buying and selling of raw materials on a number of exchanges, this is normally traded as a futures contract. Commodities include natural resources such as precious metals and oil. Find out how you can start opening positions on Crude Oil, Gold and Silver with Eightcap.

Shares

Have the opportunity to go long or short on Australia’s largest stocks here. Share CFDs allow traders to speculate on a company’s price movements, without having to own the underlying share. Company owners may choose to offer shares to potential investors in the hopes of injecting some capital into the business so that the company can grow and expand. Investors will also have a return in capital if the company is in profit. Shares can also be offered to the public as well as private investors, if a company decides to do this then it is known as an Initial Public Offering (IPO). A company’s shares will then be publicly and listed on a stock exchange.