Your Christmas Guide to the Financial Markets

Although Christmas is coming fast, you’re probably still trying to decide what to get your loved ones. Perhaps equally as important, you’re wondering what it’s all going to cost you. If you’re a new trader looking for ways to make a few extra bucks to help pay off this holiday season, you’ll enjoy this year’s Christmas guide to the financial markets.

Stocks

When most people think of financial trading, they immediately think of stocks, which are securities that represent a claim on part of a publicly-listed company. Iconic British companies like Burberry, Vodafone, Carnival, Kingfisher and SABMiller are all public companies that not only make great holiday gift ideas, but may be bought and sold on the London Stock Exchange.

It’s important to keep in mind that stock trading can be extremely volatile, partly because investors are emotional and tend to overreact to any kind of information that might impact their position. For this reason, many traders prefer stock indices, which measure the value of only a section of the stock market. This allows traders to minimise risks exposure and track the performance of the market. The most widely used index in the UK is the Financial Times Stock Exchange (FTSE) 100, which tracks share prices of the 100 largest and most actively traded companies on the London Stock Exchange. If you don’t have experience trading stocks, indices like the FTSE may be a great way to start.

Commodities

Commodities are an important part of the Christmas season. Anyone’s who’s ever received a lump of coal in their Christmas stocking has received a commodity. Tech gadgets from smartphones to handheld gaming devices also contain commodity chips, not to mention jewelry that contain precious metals.

Commodities are raw materials that may be bought and sold on the open market. They include things like precious metals (gold, silver and copper), energy (oil, natural gas and heating oil) and agriculture products (corn, wheat and coffee). Commodities have a huge impact on countries and people. For this reason, they may make excellent trading instruments.

In finance, commodities usually aren’t bought in physical form, but are accessed through futures and forward contracts. So if you decide to buy 10 pounds of cotton in the financial markets, don’t expect it to be shipped to your door.

Currencies

Have you ever thought about doing your Christmas shopping in the neighbouring Eurozone? After all, 1 euro equals about 0.70 British pounds. That means your sterling may get you a lot more in countries that accept the euro. Have you ever wondered why there’s such a discrepancy in the value of one currency versus another? Currency trading has something to do with it.

The currency market (also known as the foreign exchange or forex for short) is the most liquid financial market in the world. Each day, trading volumes in the currency market exceed $5 trillion. That’s trillion, not billion. What on earth could compel $5 trillion worth of currencies to be exchanged each day? It turns out currency exchange is vital to the global financial system. Governments, multinational banks, hedge funds, private corporations, consumers and traders operate on the foreign exchange to facilitate trade between nations, supply credit and capitalize on price fluctuations. The explosion of online forex trading platforms has made currency trading extremely accessible to the mainstream public.

Trading forex is quite simple, since all currencies are traded in pairs. In forex, a currency pair is the value of one currency in relation to another. For example, the quote GBPUSD (British pound vs. US dollar) signifies how many US dollars are needed to buy one British pound. The GBPUSD is considered one of the four major currency pairs, along with the EURUSD (euro vs. US dollar), USDJPY (US dollar vs. Japanese yen) and USDCHF (US dollar vs. Swiss franc).

The great thing about forex is it’s a 24 hour a day market that operates nonstop between Monday and Friday. That means you may make money at virtually any time during the day.

Final Word

If you’re new to the financial markets, it might be a good idea to wait until the new-year to start trading. Even the most seasoned traders wind down during Christmas and New Year. After a long year, most traders simply want to enjoy the holidays, drink some eggnog and unwrap their Christmas presents. The good news is, the financial markets described above are active all-year round. If you commit enough time to learn trading strategies and how to apply them in the market, you may begin financing next year’s holiday season as early as January.

Risk warning: Forward Rate Agreements, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you understand fully the risks involved and do not invest money you cannot afford to lose. Our group of companies through its subsidiaries is licensed by the Cyprus Securities & Exchange Commission (Easy Forex Trading Ltd- CySEC, License Number 079/07), which has been passported in the European Union through the MiFID Directive and in Australia by ASIC (Easy Markets Pty Ltd -AFS license No. 246566).

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