Forex (also known as FX) is simply shorthand for “foreign exchange”, which is the trading of one currency for another. A forex trader speculates on the price movements of one currency against another with the aim of making a profit.
Forex is the world’s most traded market with over $7.5 trillion* being traded every day. To put it in perspective, the daily average volume for the S&P 500 is only $553 billion (2.27% of the size of forex)
When you travel to another country, you usually exchange your money into the foreign currency to spend money there. Sometimes, whatever you don’t end up spending you’ll convert back. This is forex.
You’re always trading one currency against another, such as the US dollar against the Canadian dollar (USD/CAD). This is called a forex pair.
Forex is an exceptionally liquid market, and it’s reacting all the time. This makes it especially attractive to day traders looking for short-term wins.
Unlike stocks which use exchanges such as the New York Stock Exchange, forex is traded by a decentralized global network of banks.
You can trade forex 24 hours a day, 5 days a week, from Sunday 5PM to Friday 5PM. This is because the time zones of the four trading centers (London, New York, Sydney, and Tokyo) overlap with each other. So, when one closes, another opens.
Gold and silver are two of the four precious metals, which are generally considered to be gold, silver, palladium and platinum. Aside from their use in jewelry, they have important applications in engineering, electronics, and medicine. These metals are also recognized as instruments of trade in their own right and are considered by many as two of the oldest ‘currencies’ in the world.
Gold is the most popular of all precious metals and has been used in the production of luxury goods since prehistoric times. Its rarity, and resistance to decay and tarnishing has made it precious to virtually every civilization, while its softness and malleability makes it easy to use in jewelry and decorative items It is also increasingly in demand from the electronics industry, thanks to its exceptional conductivity.
Silver, generally mentioned alongside gold as a sound store of value for uncertain times, has anti-bacterial properties as well as high conductivity. This makes it ideal for a wide range of applications, including dentistry and water purification, as well as electronic engineering, in addition to jewelry
Trading in precious metals has been central to trade for millennia, and remains at the heart of commodities trading today, with gold being the metal most commonly used for this purpose.
Investing directly in gold bars is one way to access these markets. One of the largest markets for gold bars is organized in London, where the standard size of a bar is 400 troy ounces, although smaller bar sizes are available. The standard size for silver bars on the London market is 1,000 troy ounces, while for platinum and palladium the London market trades bars between 1 and 6 kilograms.
However, physically trading and taking direct ownership of precious metals is costly, requiring specialist vaulting and custody arrangements, secure transportation and insurance coverage. Indirect trading, through instruments such as ETFs, futures, and forex may provide a more practical way to access the potential of the precious metals market.
Amazon, HSBC, Rolls Royce, BP, Microsoft – examples of famous companies whose stocks are traded on stock exchanges around the world.
A stock is simply a unit of ownership in a company. If you own a stock, or a share, then you own a part of that company. For example, if a company issues 10,000 shares and you buy 100, then you own 1% of that company. If the company performs well, then the stock price will rise. If it performs badly, then the stock price will fall.
No. You can only trade publicly available stocks in companies that have floated on the stock market. When this happens, it is known as an initial public offering (IPO) and the company is regarded as a ‘public company'. A major reason why companies decide to go public is to generate massive investment. This is because when you buy a stock, the company receives that money in exchange for your ownership in it.
For example, when Facebook (now Meta) went public, it made a historic $16 billion.*
*Forbes, It's Official! Facebook Raises $16 Billion in Historic IPO
However, despite the lure of major investment, many large companies choose to remain private.
Private companies are not listed on stock exchanges. However, they can still offer shares privately, e.g., to its employees and select investors.
The advantages of remaining private are:
The risk of an IPO – a lot of time, effort and cost goes into an IPO and there’s always the danger that the shares might not sell
Lower reporting standards – in America, the US Securities and Exchange Commission (SEC) demands that public companies produce annual reports and are independently audited
Loss of control – private companies don’t answer to shareholders and can keep their business plans under wraps
Examples of big private companies include Deloitte, Subway, Huawei, Aldi, and Bosch.
Stocks are traded on stock exchanges. The role of an exchange is to provide a safe and regulated environment where stocks can be traded, and to ensure that companies listed on the exchange meet strict corporate governance standards.
Stock exchanges are not open 24/7. They have opening and closing times. Keep in mind the different time zones because you can’t trade a stock if the exchange is closed.
New York Stock Exchange (NYSE)
Open Mon-Fri, 9.30am – 4pm (EST)
Founded in 1792, the NYSE is the largest stock exchange by market capitalization in the world – greater than the NASDAQ, London Stock Exchange, and Tokyo Stock Exchange combined.* Notable companies listed on the exchange are Alibaba, Johnson & Johnson, and WalMart.
NASDAQ
Open Mon-Fri, 9.30am – 4pm (EST)
Located in New York, the NASDAQ (National Association of Securities Dealers Automated Quotations) is the second biggest exchange in the world. It is a tech-focused exchange and includes such giants as Apple, Amazon, Intel, Cisco, and Microsoft.
London Stock Exchange (LSE)
Open Mon-Fri, 8am – 4.40pm (GMT)
First founded in 1698 as the Royal Exchange, the London Stock Exchange is the largest exchange in Europe. Listed companies include Unilever, BP, GlaxoSmithKline, HSBC, and Royal Dutch Shell
Tokyo Stock Exchange
Open 9am – 11.30am then 12.30pm – 3.00pm (JST)
Founded in 1878, the Tokyo Stock Exchange is the largest in Asia. Listed companies on the exchange include Sony, Toyota, and SoftBank.
Indices measure the performance of a group of stocks. Rather than just focusing on the individual growth or performance of a singular company, indices allow you to gauge the overall health and strength of a market, and you will have heard them being frequently referred to in the media. You might have also heard them called stock indices, share indices, or simply the stock market.
Wall Street (reflects Dow Jones) The 30 ‘blue-chip’ companies on the New York Stock Exchange, including Apple, Intel, Exxon Mobil and Goldman Sachs
S&P 500 (US SP 500):: the most widely used measure of the US stock market, the Standard and Poor’s (S&P) tracks the prices of the biggest 500 companies listed on the New York Stock Exchange and the NASDAQ. It includes all the companies listed on the Dow, plus 470 others
FTSE 100 (UK 100) the FTSE tracks the prices of the biggest companies by market capitalization listed on the London Stock Exchange. The largest companies in the index are usually found in the mining, energy (particularly oil and gas) and financial services sectors
DAX (Germany 40) the DAX follows the shares of the largest 40 companies listed on the Frankfurt Stock Exchange in Germany. The DAX index is dominated by the financial, automotive, healthcare and chemicals sectors, with key components including Allianz, BMW, Bayer and Siemens
Nikkei 225 (Japan 225): This is the main stock market index for Japan, tracking the shares of 225 companies listed on the Tokyo Stock Exchange
There are two different ways in which indices are calculated: either by market capitalization (more common) or by price-weight.
Market capitalization indices
Market capitalization indices use the total market value of a company’s outstanding shares to
assess how much it affects the index. This means that more valuable companies – also known as
large caps - will have more of an influence on the index’s total value than a mid or small cap.
Examples of indices with market capitalization: S&P 500, FTSE 100, NASDAQ
Price-weighted indices use a company’s share price to determine how much it can move an
index. In other words, companies with higher share prices will have a greater influence on these
indices.
To calculate the value of a price-weighted index, you add the share price of each stock together
and divide by the total number of stocks in the index.
Examples of price-weighted indices: Dow Jones, Nikkei 225
Examples of price-weighted indices: Dow Jones, Nikkei 225
A company’s stock is generally classified as large cap (meaning it’s worth more than $10 billion), mid cap or small cap.
Commodities are the basic raw materials used by people and industries. They include minerals, such as metals and oil, foodstuffs such as oil, sugar, wheat and meat, and energy stocks. Commodities have been traded for thousands of years and may have been among the first materials exchanged between people on a large scale. Commodity trading remains crucial to global economics today. Commodity markets can be simpler to understand than other financial markets because prices are influenced by supply and demand factors that are obvious in the real world. Most commodities traded today can be split into three main areas
Energy includes the fossil fuels – oil and gas, and the renewables, like wind power and biofuels. Although ethanol and electricity generation are growing in importance as tradable commodities, the most developed commodity trading markets are in nonrenewable energy resources such as petroleum.
Most agricultural or soft commodities are staple crops grown or raised for human consumption, and include grains, coffee, corn and livestock. Some experts consider livestock and meat to be a separate category from other types of agricultural produce. Live cattle, feeder cattle and pork bellies are all part of this sector.
A proportion of agricultural commodities such as timber have purely industrial applications, and some biofuels stocks are now grown. Soft commodities are important in futures markets where people speculate on price fluctuations as supply and demand changes. They are also used by farmers who produce these commodities to lock in the future price of their produce, and by commercial consumers and resellers of these goods.
Commodity trading often takes place within specialized commodity exchanges, and the oldest dates back to Amsterdam in 1530. Since then, commodity exchanges have developed around the world, and many specialize in commodities. For example, the London Metal Exchange (LME) only deals with metals. The Chicago Mercantile Exchange (CME) deals with livestock commodities including milk, cattle, pork bellies and lean hogs. These exchanges were once physical marketplaces where traders gathered, but these days the definition is broader. A commodities exchange is now more likely to be a legal entity that has been formed to provide trading facilities and enforce rules for the trading of standardized commodity contracts and investment products based on commodity trading. You can now trade commodities online in a number of different ways – one of which is CFDs (contracts for difference).
There are two different ways in which indices are calculated: either by market capitalization (more common) or by price-weight.
Market capitalization indices
Market capitalization indices use the total market value of a company’s outstanding shares to
assess how much it affects the index. This means that more valuable companies – also known as
large caps - will have more of an influence on the index’s total value than a mid or small cap.
Examples of indices with market capitalization: S&P 500, FTSE 100, NASDAQ
Price-weighted indices use a company’s share price to determine how much it can move an
index. In other words, companies with higher share prices will have a greater influence on these
indices.
To calculate the value of a price-weighted index, you add the share price of each stock together
and divide by the total number of stocks in the index.
Examples of price-weighted indices: Dow Jones, Nikkei 225
Examples of price-weighted indices: Dow Jones, Nikkei 225
A company’s stock is generally classified as large cap (meaning it’s worth more than $10 billion), mid cap or small cap.
Simple commodities trading is the buying and selling of stocks of raw materials and involves the physical trading of goods. CFDs (Contracts for Difference) allow traders to speculate on the way the price of a commodity will change, without ever owning the commodity itself. A CFD is a contract between a trader and a broker. Traders who expect the price to go up will buy CFDs in commodities. Those who expect a fall will open a sell or ‘short’ position. The profit (or loss) comes when the trader decides to close their long or short position, and the contract is closed. At the end of the contract, the two parties exchange the difference between the price of the commodity at the time they entered into the contract, and its price at the end. Being able to make a profit in a falling market as well as a rising market is a feature of CFDs and particularly attractive when markets are volatile.
Cryptocurrencies, first introduced in 2009, have fundamentally reshaped our understanding of money. According to CoinMarketCap, as of July 2023 there are 22,904 cryptocurrencies in existence, including well-known ones such as Bitcoin, Ethereum, Litecoin, and Ripple. But what exactly are they, and how do they function? Let's delve deeper to find out. A cryptocurrency is a form of digital currency, much like traditional money, that can be used to purchase goods and services. For instance, Bitcoin can be used to make purchases from renowned companies like Microsoft, Starbucks, and Wikipedia.
Crypto trading has become popular because of the massive press coverage Bitcoin and Ethereum have generated. In addition, cryptos are not subject to the same dynamics as conventional currencies. Cryptos have no central bank regulating how much of a currency is in circulation. They are not tied to a particular interest rate, and it is not possible for a central bank to ‘print’ more coins. The traditional forces that influence other currencies, like economic factors like inflation data, generally don’t affect cryptos. Like other currencies, the value of cryptos is measured by what they are worth against different currencies. This means you can go long or short on a particular cryptocurrency against the US dollar, British pound, or Euro.
They are virtually immune to fraud
The transparent and distributed structure of blockchain technology makes it very difficult to manipulate. A blockchain is essentially a public digital ledger that records transactions. Transactions are made up of blocks and after a certain number of transactions, a new block is permanently added to the chain. Since the ledger is open to everyone on the network and no entity is in control, any hacking attempt is almost impossible.
There is a limited offer
In the case of Bitcoin, it was created so that only 21 million Bitcoins existed. The reasoning behind this was to limit the supply so that Bitcoins would eventually rise in value. As of July 2023, there are more than 19.45 million in circulation (Source: CoinMarketCap). The remaining 2.5 million have not yet been mined. You can learn more about the daily happenings in the cryptocurrency world in our news and analysis section.
You can mine them
Bitcoin mining is what powers its blockchain ledger. Powerful computers solve a computational puzzle that verifies transactions and adds them to the blockchain. When this happens, a new Bitcoin is dug up. As a reward, miners are rewarded with a new Bitcoin and transaction fees. This "gold rush" in Bitcoin mining has led to the creation of vast energy-consuming Bitcoin farms and has caused computer graphics cards (used to solve computational puzzles) to double in price in 2018. And although almost 90% of Bitcoins have been issued, it is estimated that the final Bitcoin will be mined in the year 2140. This is because the computational puzzle to release them is becoming increasingly difficult.
You can store them in a wallet
Cryptocurrencies such as Bitcoin are stored in virtual wallets, or e-Wallets. Transactions occur using public and private keys.
Some see them as "digital gold"
Cryptocurrencies are sometimes seen as a method of storing value with foreign workers choosing to use cryptocurrency to send money to their home country
In 2008, Satoshi Nakamoto published the white paper called Bitcoin: A Peer-to-Peer Electronic Cash System. He set the plan for cryptocurrency based on revolutionary blockchain technology. To this day, Satoshi Nakamoto remains a mysterious figure who never revealed his true identity, or identities. One of the main goals of cryptocurrencies was to eliminate transaction fees. Global payments companies such as MasterCard or Visa were perceived as unnecessary intermediaries that took their share every time a financial transaction was made. Cryptocurrencies were also partly a reaction to the 2008 financial crisis. Mismanagement by banks and government responses controlling money had plunged many into poverty. Bitcoin creator Satoshi Nakamoto commented: "The root of the problem with conventional currency is all the trust that is required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of violations of that trust. Banks should be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction of the reserve." In 2009, Bitcoin was launched as the first established cryptocurrency. Previous attempts to create a cryptocurrency like B-Money and Bit Gold failed to take off. And on May 22, 2010, the first recorded Bitcoin transaction took place when Laszlo Hanyecz paid 10,000 BTC for two pizzas. This event has become known as Bitcoin Pizza Day.
A variety of factors can affect the price of a cryptocurrency. They are often sensitive to news stories - for example, the prospect of further regulation or news that attacks the credibility of a currency. In addition, they are more heavily influenced by market sentiment than other asset classes.
