馃攳
Instruments Traded in the Financial Markets (Which market you should trade?) | FTMO - YouTube
Channel: FTMO
[0]
Hello traders I'm Peter and in this
video we are going to cover the
[4]
different instruments that are traded on
Financial Markets.
[8]
[Music]
[14]
So what are we going to cover this time?
We will take you through the brief
[18]
introduction of stocks,
options, currency pairs - also known as
[23]
forex -
and also about equity indices,
[25]
commodities, and cryptocurrency.
All these instruments are offering
[29]
unique specifications and ways how they
are traded which is exactly what we are
[34]
going to explore in this video.
Stocks are first on our list. A stock is
[40]
a security where the owner of a stock
become a shareholder of the company.
[44]
A shareholder has different rights - for
example:
[48]
he or she is entitled to participate in
the profit of the company
[52]
and for all dividends, but also to
participate in the management of the
[56]
company.
In some cases, shareholders are also
[59]
entitled to
vote at the general meetings or
[62]
participate in the liquidation balance
of the company in events of liquidation.
[67]
This all depends on how many stocks you
own
[70]
and what rights you have with them. So
why are stocks traded in the first place?
[74]
Main reason is for companies to raise
capital by selling shares
[78]
on the stocks exchange. This of course
attracts investors that want to evaluate
[81]
their resources.
The company's liabilities are guaranteed
[85]
by shareholders
only by their stake which is the share
[89]
price multiplied
by the quantity purchased. We distinguish
[92]
two types of stocks:
paper shares which are the physical
[96]
documents, and dematerialized share
that are entered in the electronic
[99]
records - these are not used much nowadays.
So how can you trade stocks?
[104]
Stocks are traded in many forms. You can
trade them as CFDs on our FTMO platform
[109]
or you can trade them at stocks
exchanges. In recent years trading stock
[113]
options also
rose to popularity. All these are traded
[117]
entirely
online. Example of stocks can be
[120]
Microsoft with ticker or
shortcut MSFT or Tesla with thicker
[125]
TSLA. For these popular companies with
large market cap, we use term blue chip
[131]
stocks. They have stable growth
and paying dividends on regular basis.
[135]
Opposite to these
are paper stocks - small companies that
[139]
are trading in a few cents or dollars
and experience much higher volatility
[144]
which can bring significant gains
but also losses.
[149]
Options are the only financial
instruments that is not available for
[154]
our FTMO Traders. They are very complex
products,
[157]
but having a basic knowledge about them
is something every trader
[161]
should have. Option contract gives the
buyer right but not the obligation to
[165]
buy
or sell underlying asset oftentimes
[168]
stock
at specified strike price prior to or on
[172]
a specified date depending on the form
of the option. In a real life example
[176]
imagine
you want to buy a house. The cost of the
[179]
house is
$100,000. You go to owner and you buy an
[184]
option contract which expires in three
months
[186]
this means that in time of the
expiration
[189]
you have a right but not the obligation
to buy that house for one hundred
[193]
thousand dollars
if in three months the price of the
[196]
house rise to one hundred and ten
thousand dollars. You just saved ten
[200]
thousand dollars on the purchase because
you will execute your right
[204]
of the option to buy it for one hundred
thousand dollars and then
[207]
as a clever investor you sold it for one
hundred and ten thousand dollars
[212]
you just gained ten thousand dollars
profit. But if the price of the house
[216]
falls to ninety thousand dollars there is
no reason to buy that house for one
[220]
hundred thousand dollars -
so you will not execute the option.
[223]
Because you don't have obligation to buy
a house, you need to give something to
[227]
the house owner
up front. This is called premium. So for
[230]
this case, let's say you had to pay two
thousand dollars
[233]
of premium up front - this is eventually
your whole risk
[237]
on that investment. If price of the house
rises by ten thousand dollars at any time
[242]
in that three month period
you can buy the house for one hundred
[245]
thousand dollars minus two thousand
dollars
[248]
premium pay, so we just made eight
thousand dollars.
[252]
If price of the house drop by ten
thousand dollars in any time in that
[255]
three month period,
you don't have to buy the house but you
[258]
lost two thousand dollars
in the premium because there is no
[261]
reason to buy a house for one hundred
thousand
[263]
if it's scoring worth is only ninety
thousand dollars.
[266]
This was just a brief explanation of how
options
[270]
work because you can buy and sell
options at the same time.
[273]
You can create very complex strategies
that can profit
[277]
when markets are not moving. In options
terminology,
[281]
calls and puts are used instead of longs
and shorts.
[285]
Stock Options are the most popular but
there are also Forex,
[289]
Futures, Bonds, or Commodities options you
can
[292]
trade. Currency pairs
which all knows as forex is the biggest
[298]
market
with 5.3 trillion daily volume. For
[302]
experts consists of two currencies
where one is called the base currency
[307]
and the other is the
quote currency. We trade currencies in
[310]
such a way that we speculate on the
strengthening one currency
[314]
against the other. One simple example
would be something that should happen to
[318]
all of you every time
you go to the vacation to foreign
[322]
country. You need to exchange your
currency for the foreign one because
[325]
price
of those currencies constantly fluctuate
[328]
after few weeks.
When you return from vacation, the
[332]
exchange rates are slightly different. Of
course when you are dealing with
[336]
only few hundred or thousand dollars
you really notice the difference but
[341]
buying or selling a hundred or millions
of currencies
[345]
to profit on future exchange rate change
can have a huge impact. From end
[350]
of March till start of August currency
pair
[353]
Euro-Dollar rise approximately ten
percent. This means that one hundred
[358]
thousand dollars position that is in the
forex world called
[361]
one lot, you would make ten thousand
dollars. Most of these moves are heavily
[366]
fundamentally driven
as all the currencies react to world
[370]
news and events.
We divide currency pairs into three
[374]
categories:
majors: that is Euro, Great Britain Pound,
[378]
Japanese, and Canadian Dollar
Swiss Franc, Australian Dollar and New
[382]
Zealand Dollar
all paired with United States Dollars.
[385]
Crosses which are all
major currencies but pair with each
[389]
other
instead of dollar. So for example Euro
[393]
and Canadian
Dollar or Australian Dollar and Japanese
[396]
Yen or Great Britain Pound and New
Zealand Dollars.
[398]
And then exotics that are pretty much
all the currencies from the world
[403]
such as Turkish Lira, Swedish Crown
Polish Zloty, etc. Forex is characterized
[409]
by high liquidity and often volatility,
too.
[413]
That depends on the fundamentals a lot.
Prices usually move
[417]
one to two percent every day but small
percentage movements
[421]
are compensated by high leverage that
broker
[425]
offers. Forex is going to have its own
category so we will return to it later
[429]
on.
Equity Indices are sum of many
[434]
different instruments
traded on exchange. The Equity Index is
[438]
an indicator
of the development of a given segment or
[442]
economy
of the country as a whole. Most often we
[446]
have
Equity Indices that reflect the value of
[449]
shares traded on given stock exchange.
For example
[453]
the most famous stocks index of the
Frankfurt Stock Exchange
[457]
is DAX which is composed of a share
price by 30 most
[461]
important selected German companies so
DAX's BMW,
[465]
Adidas, BASF, Bayer, Lufthanza, or Siemens.
United States indices are the ones that
[471]
are
most popular namely Dow Jones, S&P 500
[476]
or Nasdaq. The value of indices varies
based on the movement of
[480]
all shares that are contained in the
index. In general,
[484]
indices are stable investment
instruments. As a rule
[488]
they are not volatile just as any
individual stocks titles can be.
[493]
Therefore, investment
in the indices is gaining increasing
[497]
popularity
among investors. Although indices are
[500]
less volatile
instruments, they are traded through CFDs
[505]
and futures with high leverage. Thanks to
that, they offer a lot of intraday
[510]
and swing opportunities and there is a
lot of traders
[514]
who were able to make their trading
career trading
[517]
only a one index on intraday basis.
[522]
Goods that are traded in the markets
without quality differences.
[526]
Deliveries from different suppliers are
mutually substitutable. For example
[530]
a commodity cannot be a car which is
produced by many different means
[535]
at different prices. The most well-known
traded commodities are Crude Oil,
[540]
Gold, Natural Gas, but also Coffee, Corn,
or Oranges. There are two types of
[546]
traders on the market. The first
also being a minority, only speculates on
[550]
a price development
while others are really buying that
[554]
particular commodity. For example,
Starbucks
[557]
arranges coffee deliveries in advance
[561]
through the commodity exchange. For
commodities,
[564]
we need to take greater risks. Their
price
[568]
depends on climate change, global
resources
[571]
outages, trade wars, or many other
factors. It is important
[575]
to understand that some commodities are
correlated to the certain currency
[580]
of a particular economy. Correlation of
price development
[583]
between currency pairs, and commodities
are for example
[587]
Crude Oil in Canada, Gold, Iron Ore
to Australia, Dairy Products to New
[592]
Zealand, or natural gas
to Qatar. There is also a need to
[597]
monitor
world affairs, macroeconomic data, population
[601]
growth demands,
or any other factors. Same as Equity
[605]
Indices, two most
popular ways to trade them are through
[609]
CFDs
or futures.
[613]
Cryptocurrencies are a type of digital
currency
[616]
or in other words electronic money. The
biggest problem
[620]
or for someone else the advantage is
that electronic money
[624]
is not regulated. The most famous
is bitcoin - others are Dash, EOS, Ethereum,
[631]
Ripple, or Litecoin. The price changes
of cryptos are very steep. For example
[637]
bitcoin in 2018
ranged from three thousand dollars to
[641]
nineteen thousand dollars.
You can trade cryptocurrencies in the
[644]
spot market but also
as CFDs in our FTMO platform. Recently,
[648]
futures
and option contracts for
[650]
cryptocurrencies started to gain more
popularity
[653]
as well. Thank you for attention traders.
Now as we know
[657]
different instruments we can take a look
at trading terminology
[661]
which is going to be a topic of our next
video
[664]
If you have any questions or you have
not understood something again or you
[668]
are just interested in something
just let your comment down below. Don't
[672]
forget to subscribe our youtube
channel and thank you for your attention and
[676]
I wish you
steady study and see you next time.
Most Recent Videos:
You can go back to the homepage right here: Homepage