Different Financial Markets
Here are different financial markets including the pros and cons.
1. Futures Market: A futures market is an auction market in which traders buy and sell futures contracts for delivery on a specified future date.
Examples: Major indices such as S&P500, NASDAQ 100 and Dow jones Industrial Average and much more. All commodities such as precious metals, oil, corn, wheat, sugar, coffee and much more.
. High liquidity: low cost of business or small spread between the bid and ask
. High leverage: You can trade up to 10 to 20 times of your capital depending on.
. Open for almost 24 hours a day
. You can only trade contracts with specific expiration dates and not able to invest longer term.
. Extremely competitive: Many professionals trade in this market.
. High leverage: Leverage is a double-edged sword; Easier to grow your account faster but also easy to blow up your account very quickly.
Who Should trade in this market: if you are planning to become an active trader you must become familiar with the futures market
. Ideal for short term traders such as day traders and swing traders.
. A minimum of $10,000-$30,000 is necessary to be able to participate in this market successfully.
2. Forex or Currency market: Includes all major world currencies and has very similar characteristics as the futures market (high liquidity and high leverage). It is the biggest market in terms of dollar value and transaction volume.
Who Should trade in this market: Ideal for very fast and short term traders and traders that are familiar with economic factors such as central bank policies, GDP and unemployment. Most novice traders should avoid this market as there are too many variables to analyze and you have to be very skilled at executing trades
3. Stock Market: Includes all major stocks, ETFs, ETNs and is ideal for most traders ranging from novice to experienced traders.
Who Should trade in this market: Ideal for almost all traders particularly retail traders.
4. OTC or Penny stocks: Induces very small companies that are not able to get listed on major averages such as S&P500.
. Less competitive as many novice traders participate in this market.
. Cheap shares
. Majority of companies lack fundamentals and you can be more susceptible to fraudulent activities by insiders.
. Very low liquidity
Who Should Trade in this market: Ideal for momentum traders or traders that are trained to ride the momentum( euphoria) or short the hysteria.