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Foreign exchange, also known as Forex, is the whole’s largest financial market consisting of Spot FX, Forward Derivatives, Future Derivatives, and most popular among retail clients, CFD Derivatives. All of the Forex trading markets make up the most significant and most liquidated financial market, with an average volume of $5 trillion.
Buyers and seller make up the Forex CFD derivatives market with the primary participant being large international banks, who place orders via electronic trading systems. The market is traded over the counter (OTC), meaning that it is not on any regulated exchange. Thus, there is no uniform price, but every primary international bank provides its quotes with the spot marketing acting as the point of reference for the provided quotes. In fact, the spot FX market is also an OTC market dominated by large global banks.
Hard commodities including gold, other precious metals, petroleum, crude oil, copper and petroleum are contract-based tradable goods that play a significant role in the commodities market. These contracts include futures, spot prices, forwards and options.
The intermediary enabling futures contracts to be negotiated is the futures exchange or commodity market. Investors around the globe have access to about 50 main commodity markets. Precious metals such as gold, silver, platinum and palladium are the leading tradable assets due to the high economic value and durability. The commodities market is dominated by European and American corporations, with the biggest precious metals’ companies based in Canada and Germany. Despite that, Asia remains the world’s greatest precious metals market with China, India and Singapore being the leading consumers of these commodities.
The commodity market offers trading and investment opportunities in the primary economic section rather than manufactured products for retail traders globally. The market covers a diverse range of raw materials and agricultural products that are broken down into four broad categories: energy, agriculture, metals and meat/livestock. For centuries, soft commodities including sugar, wheat or corn have been traded, and these financial derivatives are preferred by investors, attributing to the significant role they play in diversifying portfolio and managing risk.
During periods of inflation or economic uncertainty, investing in contract-based tradable goods is a reliable way of risk mitigation. Moreover, commodity prices tend to move to oppose the stock market. Therefore, investors rely on commodities during periods of market volatility. Thus, both the contract buyer and seller are insured against drastic price movements that lead to increased losses.
Equity indices, commonly known as stock indices, are actual stock market indexes measuring the performance of a specific group of assets in the stock market. The value is calculated based on the weighted average of the selected stock prices, which belong to the actual represented category.
Indices serve to show the general direction of a specific stock market or the general economy of a nation. However, since stock indices are composed of a group of companies, they can be largely affected by a sudden, big move of a particular company or a specific sector of trade.
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