CFD Trading Assets

CFD trading assets refer to the underlying instruments that are traded as contracts-for-difference. These CFD trading assets are usually arranged into several asset classes for the benefit of appropriate classification. These asset classes are as follows:

  • Forex
  • Shares
  • Indices
  • Commodities
  • Options
  • Bonds
  • Cryptocurrencies
  • Interest rates
  • ETFs

Each asset class has its own special characteristics which set it apart from the others. These CFD trading assets are described briefly below.

Forex/Currencies

The currency market is the most liquid financial market in the world. As opposed to offline currency exchange services performed by banks and Bureau de Change operators, online forex trading allows traders to trade the CFD contracts on various currency pairs without actually owning the currencies themselves.

Shares

Shares are part of CFD trading assets. Share CFDs allow traders to speculate on the price changes of individual stocks across various stock exchanges worldwide without actually owning the stocks themselves.

Indices

Indices are a weighted measure of the daily performance of national stock exchanges. As the prices of the listed stocks on an exchange change on a daily basis, so does the value of the index. Stock indices are traded as CFDs. Popular ones include the Dow30, DAX30,S&P500, Nasdaq100, FTSE100, Nikkei 225, SSE180 and ASX200.

Commodities

Commodities are divided into soft and hard commodities. Soft commodities refer to agricultural-based commodities, and hard commodities refer to minerals extracted from the ground. Many of today’s commodities are the building blocks on which the global economy is built and functions. Imagine a world without crude oil and without agricultural products. Commodities have a tendency for wide price variations, which makes them suitable for use as CFD trading assets.

Commodities are usually traded on specific exchanges, and it is the prices that are derived from these exchanges that form the basis of the commodity CFD contracts.

Cryptocurrencies

Peer-to-peer decentralized digital currencies that are based on cryptography are taking the world by storm. After a boom-bust cycle experienced by Bitcoin, 2016-2017 has seen a breakout in the price action of many cryptocurrencies. The volatility swings make them particularly amenable to trading as CFD assets. Examples are Bitcoin, Litecoin, Monero, Ethereum and Dash.

Interest rates

Interest rate assets are not commonly traded CFDs. They require some specialized trading. Interest rate CFD derivatives are usually based on the interest rates set by central banks across the world. Traders can take positions on quarterly changes in interest rates as issued by several central banks worldwide. An example is the Aus 30-day Interbank Rate, traded on exchanges in Chicago.

Bonds

Bonds have an inverse relationship with long-term interest rates. You can trade the bond yields on selected government bonds from across the world.

ETFs

Exchange-traded funds (ETFs) are specially constructed baskets of financial assets which are spread across several classes. The funds permit the holders to have exposure to contracts which track the performance of these assets. The prices of these funds can then be traded on a CFD basis.

Various brokers will determine what kinds of CFD trading assets their clients will be offered. Usually, the trading experience of clients will be accessed by brokers before they are allowed to trade certain CFD trading assets.

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