Commodities, especially oil, are fundamental building blocks of the world economy. They’re the physical goods that are used directly by both consumers and industries to produce other consumer goods.
These products tend to be homogeneous in nature and play a fundamental role in the economy. Volatility can often be seen to increase whenever there are disruptions around the globe, such as with social or political unrest, or unusual weather conditions. Commodities like gold are popular with investors, as they have long been considered a store of value and therefore, a “safe haven”. These safe haven assets have historically held their value during times of economic and political uncertainty.
When trading index differentials, it’s possible to speculate on the relative performance of say the US 30 Index vs UK 100 Index. If you thought that the US 30 Index was going to perform better than the UK 100 Index, you could decide to spread bet on the differential market to rise. Alternatively, if you were of the opinion that the UK 100 Index was going to perform better, then you can spread bet on the differential to fall.
REASONS TO TRADE INDICIES
A stock index represents the top shares from a specified exchange. For instance, the FTSE 100 represents the largest 100 companies traded on the London Stock Exchange (LSE).
If, on average, the share price of these companies goes up, then the FTSE 100 will increase with them; and if they fall, it will drop as well. By allowing traders to take a broader view of a group of equities, indices reduce the risk that comes from trading the stocks or shares of individual companies. When trading global equity indices, traders are also able to diversify their portfolios geographically, creating the potential to profit from market movements around the globe.
Index CFD trading offers a smart way to speculate on the performance of an overall stock market, as opposed to selecting individual stocks and shares. In fact, index CFDs are often viewed as being less of a risk than trading individual stocks, as you are spreading your risk rather than focusing only on a single company.
This allows traders to be further exposed to the market, as most of the factors that affect individual companies are taken out of the equation. If you believe the FTSE 100 in the UK is going to do well, there's a CFD that allows you to profit when it does. If the Dow Jones Industrial Average looks like there are a number of factors that will make it fall, you can trade that for a profit, too.