When you trade CFDs with Plus500, you have a wide range of asset classes available to choose from. You can trade on currency pairs, cryptocurrencies* soft and hard commodities (such as wheat, gold and oil), shares listed on exchanges around the world, well-known indices, Exchange-Traded Funds and options* on popular shares and commodities.
*Subject to operator.
The foreign exchange market (Forex) - is a global decentralized market for exchanging one currency for another. It is by far the largest market in the world, with an average daily trading volume of over $6 trillion. The most traded currencies are the United States Dollar (USD), Euro (EUR), Japanese Yen (JPY), Pound Sterling (GBP), Australian Dollar (AUD), Canadian Dollar (CAD) and Swiss Franc (CHF).
When trading Forex CFDs, you are essentially speculating on the price changes in their exchange rate. For example, in the EUR/USD pair the value of one Euro is determined in comparison to the US dollar, and in the GBP/CHF pair the value of one British pound sterling is quoted against the Swiss Franc. If you think the exchange rate will rise you can open a ‘Buy’ position. Conversely, if you think the exchange rate will fall you can open a ‘Sell’ position.
With cryptocurrency CFDs, you are trading on the price of the underlying digital asset with the funds in your Plus500 account. You do not need a special wallet to hold these assets and you can trade larger quantities using leverage. Plus500 CFDs allow you to seamlessly gain exposure, making it more feasible to speculate on high valued cryptocurrencies, such as Bitcoin. Other cryptocurrency CFDs* that are offered on the Plus500 trading platform include: Ethereum/ Bitcoin, Ethereum, Crypto 10 Index, Litecoin and many more.
* Subject to operator.
Commodities are natural products that appear in the ground or are agriculturally cultivated. Commodities play a key role in determining the prices of other financial markets as commodities are used as input in the manufacturing process- meaning national economies in general, and publicly-listed companies in particular, are affected by their prices.
The most common way for trading commodities is to buy or sell a futures contract. The price of a commodity futures contract is standardised, meaning the underlying instrument’s quantity (pound, ounce, barrel, etc) is predetermined and appears the same for all market providers. Futures exchanges are markets where financial institutions and individuals can buy, sell and trade a wide variety of commodities, such as Oil, Natural Gas, Gold and Corn. These world’s leading futures exchanges are located in the United States, and include:
- The Chicago Board of Trade (CBOT) - a commodity futures exchange based in Chicago and run by CME Group Inc.
- The Intercontinental Exchange (ICE) - an exchange based in Atlanta, offering primarily energy-based commodities.
- The New York Mercantile Exchange (NYMEX) - an exchange located in New York City and run by CME Group Inc.
Most commodity CFDs offered by Plus500 are based on futures contracts from the world’s major exchanges. Trading CFDs on Futures makes them accessible to lower initial margins and position sizes.
Shares (interchangeably referred to as equity or stocks) are the ownership rights to a corporation which are divided among its stockholders.
In the world of finance, online stock trading generally signifies as the purchase or sale of shares issued by companies that are publicly traded on stock exchanges such as the New York Stock Exchange (NYSE), the London Stock Exchange (LSE), the NASDAQ or the Tokyo Stock Exchange (TSE). The price of a particular stock is determined by the total number of shares a company has created, usually measured in the currency of the stock market it is listed on, for example, penny in the UK, euro in the European Union, yen in Japan and US dollars in the United States.
CFD share trading, on the other hand, is a form of trading that enables you to trade with leverage* on the prices of publicly-listed companies - such as Apple, Tesla and Facebook - without the need of owning the underlying stock.
*Leveraged trading activity involves substantial risks for losing all of the invested funds in a short time period.
A stock market index is a performance indicator of a country’s economy or of an industry/sector within an economy. For example, FTSE 100 represents the largest 100 companies traded on the London Stock Exchange, and the NIKKEI 225 is a stock market index for the Tokyo Stock Exchange, made up of the 225 largest, publicly-traded companies in Japan (calculated relativity according to their prices).
Market indices are typically based on a basket of shares and are thus considered good measures of the current market sentiment. If share prices of most companies are included in the index, then there is an increase in value, and the index tends to rise. On the other hand, if the shares decrease in value, the index will ultimately drop as well. In other words, when you buy or sell a stock index, you are effectively investing in the performance of these shares and thus avoid factors that influence the performance of individual companies (such as a lack of market volume).
An ETF (Exchange-Traded Fund) is a financial instrument that tracks the performance of assets such as stocks, commodities or indices, and generally focuses on specific sectors or areas of business. Trading ETFs through CFDs offers several advantages that have helped increase their popularity in recent years:
- ETFs allow you to trade an entire market as though it were a single stock or commodity,
thus helping you spread out your potential risks or rewards.
- ETFs are designed to give you exposure to diverse industries and sectors within capital markets. This means you can diversify your portfolio without the need for a large amount of capital.
- Niche markets - ETFs often cover products or services that appeal to a small, specialized section of traders - for example, SCHH Schwab US REIT, which focuses on US companies in the real estate sector - meaning that as a trader you have the ability to tap into new and unique trading opportunities.
*Subject to operator.
Trading options involves speculating on the future price (strike price) of an underlying instrument such as a stock, index or commodity. Plus500 offers two types of options CFDs: Call options and Put options, and you can open Buy or Sell positions on both types. If you enter a position on a Call/Put option, you are essentially entering a contract on the price of an underlying instrument that will reach (or surpass) at the expiry date.
- Puts – a buyer/seller of a ‘Put Option’ expects the price of the underlying instrument to fall/rise.
- Calls – a buyer/seller of a ‘Call Option’ expects the price of the underlying instrument to rise/fall.
In CFD trading, your profit or loss is determined by reference to the movement of an option price, and opposed to the real market, you are not buying or selling the underlying asset itself.
To learn more about the different asset classes offered by Plus500 and the over 2,800 instruments available for trading with leverage, click here. Alternatively, you can find this information by signing in to the trading platform on your mobile, tablet or computer.
*Subject to operator.