If you want to make money trading online, you will need to pick the assets you want to invest in. And there are hundreds of trading instruments available for trading out there. For a beginner trader, it can become quite a challenge to sift through all these instruments and pick the most profitable assets to trade. In this article, we've compiled 5 most in-demand and potentially profitable instruments, along with some basic information about them.
The EURUSD currency pair is the most traded pair in the foreign exchange market. It comprises the Euro and the U.S. Dollar - those are the currencies of the world's two largest economies. This instrument is highly liquid, so it tends to be less volatile compared to other currency pairs. Under certain conditions, however, even the most liquid instruments can demonstrate extreme volatility. So, keep that in mind.
The EURUSD pair is affected by political movements related to either the euro or the dollar. For example, when the European Central Bank intervenes in the market in an attempt to weaken the euro, you can expect the EURUSD to decline.
The Japanese yen (JPY) is the official currency of Japan and is also considered as a reserve currency together with the USD, the euro, and the GBP. The Japanese yen can show a number of daily fluctuations, but the Bank of Japan (BoJ) frequently intervenes to buy and sell large amounts of the currency to control the value of the yen.
Like most export-oriented countries, Japan's government places a lot of emphasis on keeping the yen low to keep a competitive market. If you hold U.S. dollars, you can potentially turn in good profits by taking advantage of the yen's daily movements. You just need to spot the right time to enter the market.
The CAD and the USD rates are closely related. Canada is America's fiscal neighbor and one of its major trading partners. It's also worth mentioning that the exchange rate between Canada and the U.S. strongly correlates with the oil price, and it's largely due to the way Canada earns U.S. dollars.
Fluctuations in oil prices can significantly affect CAD because Canada's economy relies heavily on crude oil exports. In 2016, oil prices plummeted to their lowest levels in over a decade. During that time, the CAD rate dropped to 1.46 against 1 USD. If you want to exchange USD for CAD, you should closely watch oil prices to determine the best time to make a trade.
Gold is one of the oldest precious metals that has held the fascination of human societies since the beginning of recorded time. It's also one of the most valuable commodities in the world. This shiny yellow metal melts easily into bars, coins, or jewelry. It doesn't rust, corrode, or decay. That's why Gold is in high demand in various industries (medical industry, dentistry, electronics, aerospace technology, and even glass making). Among the largest Gold-producing countries are China, Australia, and Canada. The largest consumers of Gold are China and India.
Gold is also a safe-haven asset. It acts as a hedge against any economic crisis. Gold is a highly liquid commodity. So, what drives the Gold demand? When inflation hits, the national currency depreciates. Gold functions as a good store of value against a declining currency. So traders prefer to invest in Gold to protect their portfolios against inflation. Besides inflation, Gold prices are also affected by supply and demand, geopolitical events, as well as the U.S. dollar.
Crude oil is one of the most actively traded commodities in the world. By refining crude oil, one can produce high-demand products such as gasoline, kerosene, diesel, etc. Crude oil prices are determined by global supply and demand. Apart from that, they also react to many variables, including economic news and the political situation in the Middle East, as this region is one of the world's largest oil suppliers. Natural disasters like hurricanes, which can potentially disrupt oil production, can also be a significant driver of its cost.
As you can see, apart from trading traditional currency pairs, you can successfully trade commodities. They can serve as an attractive investment option. If you want to build a well-balanced investment portfolio, you should include this class of assets as well. There are different ways to invest in commodities, but commodity futures contracts are the most popular method.