CFDs Trading

Gold Trading and other precious metals, along with crude oil, copper or petroleum, are hard commodities that play a major role in the commodities market and are contract-based tradable goods. The contracts based on precious metals can include futures, spot prices, forwards and options.

The intermediary that enables futures contracts to be negotiated is the futures exchange, or commodity, market. Investors worldwide can access about commodity markets, with precious metals such as gold, silver as the leading tradable assets due to their high economic value and durability. While Asia is the worldwide largest precious metals market (China, India, and Singapore being the top consumers of these commodities), the commodities market is dominated by European and American corporations, with the biggest precious metals companies based in Canada and Germany.

The futures exchanges market, where besides currencies and stock indices and other precious metals are also actively traded, is available 24 hours a day, except weekends. Generally, precious metals are purchased in two main ways: on spot contracts and on futures contracts. While spot contracts involve the physical buying or selling of these commodities for payment and delivery on the spot date (typically two business days following the trade date), futures are standardized contracts, mutually agreed on by two parties to buy or sell precious metals of a specific quantity and quality for a price agreed on (called futures price) with delivery and payment at a later date in future (called delivery date). The buying and selling of futures take place without the actual physical ownership of the commodities traded and done via online trading.

Equity indices, or stock indices as they are also commonly known, are actual stock market indexes, which measure the value of a specific section of a stock market. They are calculated based on a weighted average of the prices of selected stocks, which belong to the actual category that they represent. Stock indices can represent a specific stock market such as NASDAQ, or they can represent a specific set of the largest companies of a nation such as the American S&P 500, the British FTSE 100, or the Japanese Nikkei 225.

The purpose of the indices is to show the general direction of a specific stock market or of the general economy of a nation. However, since stock indices are composed of a basket of companies they can be very much affected by a big move of a specific company or by a big move of a specific sector of trade.

The actual weight given to a stock index from the underlying basket of stocks varies amongst the various indices, which means that not all use the same criteria to derive the end result. The two main ways to calculate the actual weight a specific underlying stock produces to the index itself is price weighting and capitalization weighting.

Below you can see the category which some of the very popular indices belong to:

  • 1. Dow Jones (US30) and Nikkei 225 (Japan225) are price-weighted indices.
  • 2. FTSE 100 (UK 100), ASX200 (Australia 200), Hang Seng Index (Hong Kong 50, DAX (Germany 30), CAC 40 (France 40) and IBEX35 (Spain 35) are some of the main stock indices which are capitalization weighted.