Online trading platforms offer you the possibility to trade in a broad range of markets. In fact, the range of choices can be a little daunting. Let’s examine the different asset classes available for investment, look at what moves those markets, and who they might be suitable for.

Indices

Indices are by far the most popular traded asset class on many investment apps. A stock index measures the performance of the stock market, or specifically a section of it (the NASDAQ 100, for example, representing the 100 largest non-financial stocks listed on the technology-heavy exchange). Stock indices are commonly, but not always, compiled by country. These indices can then be used as rough benchmarks to track the performance and the health of that country’s economy. 

For example, the FTSE is the benchmark index for the UK. The DAX is the benchmark index for Germany, and the IBEX is the benchmark index for Spain. In the US, the S&P 500 is the benchmark index compiled from the 500 largest US companies by market capitalisation. The Dow Jones is made up of 30 large US stocks in various industries.

Stock indices can move up and down depending on factors such as macro-economic releases like inflation data, GDP data, employment figures, interest rate decisions, and geopolitical events such as political elections or trade disputes.

One of the advantages of trading indices is that the information needed to do research is easily available, and emerging trends are usually mentioned in the financial media. However, it is worth noting that major events are often difficult to forecast.

There are other reasons why indices are popular. One such reason is that an index often covers a wide range of sectors, offering more diversification than a single stock. Furthermore, depending on your trading platform, it is possible to trade indices 24 hours a day. (More generally, you would invest in an Exchange-Traded Fund (ETF) that tracks a particular index.) This, though mostly irrelevant to long-term investors, is highly convenient for day traders. It is less restrictive than trading shares, which must be traded during the hours of the exchange on which they’re listed. 

Finally, indices are liquid. This means that it is possible to buy and sell ETF shares without delay, regardless of market conditions. 

FX

FX, or forex, or “foreign exchange” to those who like to speak in full sentences, is another very popular asset to trade. In fact, it is the most heavily traded market in the world, with over $5 trillion worth of transactions globally every day (2016 Triennial Central Bank Survey of Foreign Exchange and OTC Derivatives Markets Activity). 

FX is always traded in pairs. You are trading the value of one currency against another. For example, if you were to take a position on EUR/USD, you are trading the value of the euro against the dollar. The most popular currency pairs to trade are EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD and USD/CAD. 

FX is not traded on a central exchange; therefore, it is possible to trade it 24 hours a day from Monday morning in Australia through to Friday evening in New York. Given the extended hours that FX pairs are traded, they suit a wide range of different trading styles, from very short-term to much longer-term. Currency pairs, particularly the most traded ones, tend to be very liquid, meaning that they have a tight spread (the difference between their purchase and sale price) and so are relatively cheap to trade compared to other assets.

Like stock indices, FX pairs can move up or down depending on factors such as macro-economic data, particularly GDP data, inflation numbers, employment figures, central bank monetary policy, and geopolitical events. Macro events can be anticipated using an economic calendar. However, geopolitical events can develop very suddenly and unpredictably, resulting in big swings in the currency markets. Whilst volatility is a trader’s friend, large and unpredictable moves in the market can be very difficult to make money from. The best approach when trading FX is to keep to strict stop losses and a well-planned approach.

Commodities

Commodities are raw physical assets, or derivative products (such as futures contracts) based on them. The commodities traded on investment apps fall into four categories:

Metals, such as gold, silver, copper

Energy, such as crude oil, electricity, heating oil, natural gas,

Livestock, such as hogs, pork belly, live cattle

Agriculture, such as corn, sugar, coffee.

Basic supply and demand principles tend to drive commodity markets. Low supply and high demand usually drive up prices; high supply and low demand have the reverse effect. Given this dynamic, commodities are usually easier to understand than some other assets. Each commodity market will have a particular set of factors which investors and analysts watch closely. This makes research relatively straightforward.

Commodity markets can, at times, produce some big swings. A 3% move in oil prices over one day, for example, is not unheard of. Having a solid risk management strategy is important when trading commodities. 

Shares

Most investment apps offer a wide range of shares to trade from across the globe, from well-known names to less mature, stable companies. This means it’s incumbent on each investor to follow a rational diversification strategy.

One way of trading shares is by using fundamental analysis. This might include looking at the strength of the company’s balance sheet and earnings data, for example. Traders interested in a company might compare its price-to-earnings ratio with its competitors to see whether the firm is fairly valued.

Fundamental analysis on stocks can sometimes be very time-consuming. Trading shares generally requires more in-depth analysis than some other assets. 

Shares are only traded during the hours that the relevant exchange is open. Stocks listed on the LSE, for example, trade from 08:30 until 16:30 British time. If you are not available to trade within those hours, then you must wait for the following day.

If you have a background in share dealing, then you might find that you are more drawn to trading shares, given your experience. Less knowledgeable investors may prefer to stick to share-based, professionally-managed mutual funds or ETFs, which carry lower risks.

Conclusion

With so many markets and asset classes to choose from, there really is something for everyone. Indices and FX offer greater flexibility through 24-hour trading and liquid markets, although these can be volatile and unpredictable. Commodities tend to follow basic supply and demand principles but can still experience big swings. Shares are more restrictive in terms of the hours that they can be traded and can involve more in-depth, time-consuming research. 

Other markets in which you can trade include cryptocurrencies and bonds. Consistently successful investing is never simple or easy, though – it is recommended that you learn as much as possible about your chosen market before you risk any serious amount of m