Hello traders in this video we will look at different commodities and equity indices and their specific behaviors, [music] gold, nasdaq, dex or crude oil are extremely popular instruments that are traded in our ftml platform compared to forex, where we separate instruments into three brackets majors miners and exotics, and all of them have the same training hours and sessions. Things are a little more complicated in commodities and industries, and that is exactly what we will cover in this video! Those different characteristics come from the fact that both commodities and indices are heavily traded in the futures market, although there are also futures contracts for all currency majors, namely euro, pound, aussie, kiwi, canadian, swiss and tien futures volume in the forex spot market is so much higher compared to futures, which makes those currency futures not so important, but for others, the futures market plays a significant role? As most of you already know, our ftmo platform offers a contract for difference, cfd instead of futures!
So what is the difference between spot and futures if we use the example of the german stock index dex that tracks the top 30 blue chip stocks? the official index value calculates its cash value? This is the price you often see on television or any other news outlets, as the index’s official price! The index by itself reflects the price of stocks that are inside the index? In the case of dax, it weighs the price of top 30 german blue chip stocks, for example, there is linda which has a weight of 10 of the index.
Sap siemens, allianz, bayer, bmw, adidas and so on. The futures contract is based on the same underlying asset, but it brings other components into calculation, such as interest rate or time to expiration. If you take a look at your trading platform, you might think that the cfd you see there is based on the index price itself, but this is not true, because index price updates every few seconds, the cash cfd in your trading platform is based upon the real time, updated futures contract that has been adjusted to reflect the current cash price!
The cfd of this cash market is a synthetic product. That is why you won’t find decks in your platform, but rather jr30 or de-30, etc? This is the same for other products such as nasdaq, which is called ustech or us100, and so on.
Although prices of cash and futures contracts are different, the chart remains absolutely the same as they both tracked the same underlying asset. So what is the difference between trading cash and future soundtracks? the biggest difference is that futures contracts have expiration dates. Therefore, their prices can differ from the underlying asset! We could see this in oil in april of this year, where prices of the front month contract were trading below zero, as oil demand halted, while supply cuts from the opec weren’t scheduled to come into effect until the 1st of may, which was after the expiry date for may 2020 futures. These situations are very rare. More importantly, the conditions for trading cash and futures are more so the same with just a difference of prices and size of contracts.
Commodities commodities are separated into four major categories: metals, energies, meats and agricultural commodities? In metals we can find gold, silver, copper or palladium! Energies are crude oil, brent oil or natural gas. These two categories are the most popular ones. Traders choose to trade, but we can find some traders that also specialize in meats such as live cattle or lean hogs or agricultural commodities, where we can find corn or wheat, because traders prefer to trade, metals and energies. The most we’ll focus on them in this video commodities in general tend to be more of a risky and volatile product to trade. Thanks to high dependence on supply and demand dynamics, they are very often influenced by events that are impossible to predict. We could see that in the oil crash of 2020, but there are more examples with different natural or manmade disasters, epidemics, etc, metals, gold, silver, platinum, palladium or copper.
The first one gold is the most popular and traded metal.
It is due to its high volatility that brings opportunity to the markets every day. So why is gold moving so much? it is mostly because market participants use gold as a hedging instrument against periods of high inflation and currency devaluation. This is why so much money is flowing into the gold market every day gold is traded in many forms in the spot, market, futures and etfs. According to bloomberg, gold is at third place in daily traded volume, with s p 500 on second and u. S treasuries. On the first place, from approximately 150 billion dollars of daily volume, little over 50 is traded over the counter?
The second half is traded in futures markets and etfs make only around one to two percent.
Although gold is traded for 23 hours a day five days a week, there are parts of the day where volume is much higher. First one is the london open! We know from trading forex this time of a day which starts at 8am! London! Time brings a great amount of volatility thanks to the lbm!
If you wonder what lbm is, lbm stands for london bullion market, and it is the world’s biggest otc market for gold and precious metals? The second part of the day, with high volume, starts at 1 20 pm and ends at 6 30 pm london time to make a little more sense of it. We should actually use a 7. 20 am till 12 30 pm central time, as this session exists? Thanks to the us markets. These hours represent the former pitch sessions for gold traded at comex exchange, and, although most of the trading paids do not exist anymore, these hours that are also called rth. Regular trading hours are still well respected by a lot of large market participants, energies, crude oil, natural gas, brand or gasoline are the most known energies that are traded with a crude oil being the most popular one same as metals.
The energy market is heavily dependent on supply and demand dynamics. Traders that are interested in trading energies should also be aware of economic downturns shifts in productions enforced by organization of petroleum, exporting countries, opec and changes in alternative energy sources that aim to replace crude oil as primary source of energy!
Crude oil, the same as gold can be traded over the counter, with an etf and in futures and options market that are the most popular for trading crude oil. The derivatives market for energy is a huge one, as cme alone handles over 18 million contracts each day and nymex wti light sweet crude oil futures trade, nearly 1! 2 million contracts a day with each contract representing 1, 000 barrels of crude oil. So, as crude oil is the most popular energy market to trade, we should follow the us trading hours as they bring the most trading volume from the 23 hour trading day. To be exact from 8 am to 1 30 pm central time.
We can find regular trading hours of nimex crude oil if you are not living in the us, and you are not available to trade during these hours, you can try to pick up brent oil, which is the uk version of crude, and it is traded at the ice exchange with a lot of volume during the london morning. Hours, equity, indices, equity indices are one of the most popular instruments to trade.
The equity index represents the value of a group of stocks from a given country and shows the current and historical performance of that stock index. The first stock index was created in 1896 by charles dao, and we can still trade it today, under the name of dgi don jones index back in 1896, it contained 12 largest companies of the united states. Nowadays there are 30 of them.
The other extremely popular indices in the us are standard and poor’s index s p 500, which tracks performance of 500 largest companies listed on u. S stock exchanges and is also the second highest market by traded volume at the cme futures exchange right behind the us treasuries! The third very popular index in the united states is nasdaq nq 100 that contains 100 largest companies in the technology sector in the us compared to s p 500. It is characterized by its high volatility due to the fact that technology stocks are very popular amongst the investors and are traded very often. What is the best time to trade, u. S indices, of course, during the u. S trading hours, where there are th regular trading hours start at 8, 30 am central time and last until settlement price at 3 15 pm central time. These are the hours where you can find the most volume and volatility in the us markets. Therefore, if you are interested in trading u. S indices, you should be monitoring them closely during the regular trading hours for those that do not have time or simply do not want to trade u.
S markets? They can choose indices for almost every country in the world, but some of them are more liquid than others! Let’s have a look at the most popular ones?
In europe, there is dex 30 for germany, hood c100 for uk cac 40 for france and stocks 50 that represent variety of companies across europe! Amongst our traders, dex is the most popular one!
Dex is composed of the 30 largest companies traded in the frankfurt stock exchange based on their market capitalization.
The index is managed by deutsche borsa and constantly updated by an electronic system called, etc. Dex popularity is based on the high volatility and the fact that germany is the largest economy in europe. Therefore, it attracts investors from all corners of europe.
European indices are traded from 1am until 10 pm central european time, with the regular trading hours starting at 8 am and last until the settlement price at 5 30 pm central european time. Footsie 100 represents 100 companies from the london stock exchange, and, if you want to learn more about it, you can have a look at our video about trading in the united kingdom in asia?
Trading indices is also very popular, although we can hear about it, maybe a little less compared to us and european markets. Nonetheless, they can still bring great opportunities not only for traders that are based in asia, but also those in europe or us that want to trade in unusual trading hours due to their day job or other obligations?
If you are interested in trading asian indices, you can look at markets such as nikkei 225, which contains 225 stocks traded at tokyo, stock exchange, hang seng 50 contains 50 companies traded at hong kong stock exchange or very popular index nifty that contains 50 largest companies traded in national stock exchange in india. Ok, traders, this is it for the video. Do you trade, indices or commodities? if so, let us know in the comment section below which ones are your favorite, don’t forget to subscribe to our ftmo youtube channel and, as always, trade safe.