Financial trading is, at its core, the act of buying and selling financial assets like stocks, currencies, or commodities—with the goal of making a profit. Today, a lot of trading is speculation, and the traders involved are not really interested in becoming part-owners in a company, receiving a bag of cocoa beans, or having a bunch of Euro available for a trip to France. Therefore, a lot of derivatives are utilized that work well for speculation, such as cash-settled options and futures contracts, and synthetic financial products like contracts for difference (CFDs).
Trading might look clean-cut on the surface, but the moment you step into the real thing, you realize it’s not just numbers flying across a screen – it is strategy, emotion, timing, and sometimes a little chaos wrapped in adrenaline.
At its core, trading itself in ancient. People traded livestock, spices, and sea shells long before anyone thought of stock tickers or crypto wallets, and many of our ancestors traded hoping to make a profit rather than actually owning cows, eating pepper, or adorning themselves with the sea shells. Financial trading has stuck a modern face on a very old instinct: swap something for something else, and then earning a profit later.
So let’s break it down. When we talk about financial trading, we are usually talking about things like company shares, foreign currencies, bonds, options, futures, or even digital assets like crypto. Every trade is basically a bet. You’re saying, “I think this thing is going up,” or “I think it’s going down,” and you put your money where your mouth is. If you’re right, you profit. If you’re wrong, well, not so much. That’s the gamble.
Some folks trade to make quick cash in a matter of minutes or hours. When no positions are kept open after the end of the trading day, it is called day trading. Others hold onto assets for several days, weeks or even months (swing trading), and there are also those who keep positions open for even longer, e.g. position traders. At the other end of the spectrum, we find the investors – they are not considered traders per se, but sometimes the line between position trading and investing gets blurry.
The financial markets are also used for hedging, by individuals and organizations that wish to reduce their risk rather than take a gamble. A farmer can for instance use financial instruments to lock in the price of wheat well before the harvest season, and a large biscuit factory can use the same type of instrument to lock in the price of wheat in advance and avoid the risk of having to pay a higher price at harvest time. In stormy times, people can become very interested in investing in gold or buying Swiss franc; not because they hope to profit from price swings but because they want to reduce risk. This type of market participation – aiming to reduce risk rather than profit form price swings – can have a huge impact on a financial market, and is something traders need to understand and be aware of.
Risk Is the Constant Companion
We can’t talk about trading without talking about risk. It’s not just something you deal with—it’s the very fabric of the game. You’re risking your money by participating in the markets, and you need to have a solid risk management plan in place if you want to stay in the game. Smart and disciplined traders know when to take a loss and when to ride a win. They have rules. Force of character. They know that one bad trade—done recklessly—can wipe out months of gains, and they take steps to avoid putting themselves in that type of situation.
People think trading is all about being right, but it is actually more about how much you make when you’re right versus how much you lose when you’re wrong. That’s the secret sauce, and long-term profitable traders are usually highly skilled when it comes to elements such as position sizing, stop-loss placement, different types of stop-loss orders, take-profit orders, and strategies to avoid emotional trading in the heat of the moment.
Here’s the part people don’t talk about enough: trading messes with your head. You get greedy when things are going well. You get scared when they’re not. You second-guess yourself constantly. You feel invincible one minute, clueless the next. You need to build a solid trading plan, including strategy and risk management routines, and have the discipline to stick to it. Evaluate your performance regularly, and adjust your strategy and risk management as necessary – but do not make changes in the heat of the moment.
A lot of novice traders burn through their account quickly because they fail to stick to a proper risk-management routine. Especially the ones who come in thinking they’ll be rolling in Lambos by the weekend. The market has a habit of humbling people fast.
Different Types of Trading
Trading isn’t one-size-fits-all. There are day traders who thrive on fast-paced action, buying and selling dozens of times a day. Then there are swing traders, who might hold positions for days or weeks, riding out trends. Position traders keep potions open even longer, often several months or even more than a year.
And of course, there are algorithmic traders—those who build code and let specialized software scan the markets and open and close positions for them, according to predefined rules. Cold, emotionless bots that can do thousands of trades in a second. But whether it’s humans or machines, it’s still all about predicting where the price is headed next. Nobody knows for sure. There is always risk, even with algorithmic trading.
Ask five traders what they do, and you might end up with five very different answers. One’s glued to the screen clicking buttons like a gamer during intense day trading sessions, while another is busy going to grad school and is only checking charts once a week. Same title, wildly different lives. Because trading isn’t one thing—it’s a mix of styles, speeds, and strategies. And what works for one person might wreck another.
If you’re thinking about getting into trading—or just trying to figure out why your friend won’t shut up about “candles” and “entries”—it helps to know the main types. Each one has its own rhythm, risk level, and type of person it attracts.
Day Trading
This is the fast-paced, high-pressure kind you see in many movies. Day traders buy and sell within the same day, often within minutes or hours. They don’t hold anything overnight, which is why it is called day trading. By not keeping any positions open over night, day traders avoid overnight fees and overnight risks. When the trading day is over, all their positions are closed. They do no have to worry about a surprise news headline that will pop up while they’re asleep and wreak havoc with the markets.
Day traders rely heavily on charts, patterns, and real-time data. They are typically skilled at technical analysis and live for momentum. There are also day traders that combines technical analysis with news trading, honing their ability to predict how the market will react to news.
You can learn more about day trading and how to start day trading by visiting DayTrading,
Scalping
Scalping is a subcategory of day trading, and it is a type of really quick trading – even by day trading standards. You’re in and out in seconds or minutes, just trying to make tiny profits by opening and closing positions over and over again. A couple cents here, a couple cents there. Do it a hundred times, and those pennies start stacking up, even when the profit is small on each individual trade.
This style usually demands a broker that will give you direct market access and low fees per transaction, and a trading platform that is suitable for scalping and will permit the use of special scalping software.
Scalping is intense, very niche, and super technical—but the payoff can be solid if you’ve got the stomach for it. An advantage with scalping is that you can profit even in stale markets, since there will still be small moves up and down on stale markets.
Swing Trading
Swing traders hold positions for a few days or a few weeks, maybe even a few months if circumstances are right. They’re not trying to catch tiny moves—they want to catch a chunk of a trend.
Swing trading fits better with people who have day jobs or for any other reason can´t devote time to intense day trading sessions. You can check in once or twice a day, you can set alerts, and you can use stop-loss and take-profit points that gives you wide margins. Less screen time, more breathing room – but you need to be patient.
Swing trading mixes technical analysis (chart patterns, indicators) with a bit of fundamental awareness (like, hey, this company’s about to drop earnings next week).
For some traders, swing trading and other types of trading that require patience is actually too stressful, because they can stop worrying about their open positions. They have a strategy that requires patients, but they become obsessed with constantly checking their phone to see how the market is moving. For this type of trader, intense day trading can actually be less stressful holistically speaking, since they will be able to check out and ignore the market once all their positions have been closed for the night.
Position Trading
This one’s even slower than swing trading. Think months, sometimes more than a year. Position traders are closer to investors than traders in how long they hold stuff, but they still make strategic entries and exits. They’re not buying and forgetting—they’re just extremely patient.
As a position trader, you’re playing the long game, riding big-picture trends in the market or economy. It is still trading, just with a very large heap of patience. You are not putting fund shares in an retirement account and forgetting about them for years, but you’re not worried about daily noise either.
Algorithmic Trading
Algo traders use specialized computer programs that they program to open and close positions in accordance with very specific instruction. They write scripts, set conditions, and let the bots do the buying and selling automatically.
Some hedge funds use this at scale, firing off thousands of trades a second. But small individual retail traders can also run bots; it is no longer something that is off limit for small-scale traders.
Markets
Stock Market
Let’s start with the classic. The stock market is where you buy and sell shares of publicly traded companies—think Apple, Amazon, Netflix, or some tiny biotech no one’s heard of until it randomly explodes 200%.
You’re basically buying a small piece of a company, hoping it becomes more valuable. Prices move based on earnings, news, sentiment, memes (thanks Reddit), and a thousand other things. If you’re into fundamentals, balance sheets, and long-term growth, this might be your choice for long-term investing, but the stock market is not just for investors. Traders— including day traders—love the stock market for its volume, volatility, and big-name companies with price action worth chasing.
In addition to hoping for your stock to become more valuable, you can also hope for dividend payments. A dividend payment is when a stock company decide to use some of its profits to pay its shareholders, i.e. the owners of the company. Some companies have a long history of paying dividends to their shareholders every year, or even more frequently. It is typically large and well-established companies that pay dividends, since they do not need to retain all their profits to pay for expansions, research and development, and so on. Generally speaking, investors are more interested in the ins and outs of dividend paying stock than short-term traders.
When it comes to stock trading, you´ve got specialized stock exchanges, such as the New York Stock Exchange (NYSE) and the NASDAQ, which are open during the day and closed at night and during weekends and holidays. Stocks can also be traded without involving a stock exchange, and this is known as over-the-counter (OTC) trading. When a company is listed for trading on an exchange, it is known as a publicly traded company. Each stock exchange has its own set of rules and requirements that a company must fulfill to be listed with them, and a company that fails to adhere to them will be delisted (removed).
Between 1980 and late 2023, the total market capitalization of all publicly traded stock companies world wide increased from 2.5 trillion USD to 111 trillion USD. A great number of stock exchanges exist around the world, but less than 20 of them make up almost 90% of the global market capitalization. Data from late 2024 show that NYSE and Nasdaq are the largest stock exchanges by far in terms of market capitalization, with NYSE topping the list with a market cap of more then 31.5 trillion USD and Nasdaq coming in second just over 30.6 trillion USD. The gap down to number third was pretty big, with the total market cap for the Shanghai Stock Exchange being slightly above 7 billion USD.
Bond Market
Not everyone’s chasing fast money. The bond market is slower, steadier, and more about income than excitement. You’re lending money to a government (country), company, or municipality, and in return, they pay you interest on the loan. At the end of the bond´s lifespan, you get your principal (the money you lent) back from the borrower.
The bond market is massive. Institutional traders love it, but many novice retail traders overlook it because it is not exciting enough. Traders in this market focus on interest rates, credit risk, and economic stability. In times of instability, bonds tend to become more popular.
Forex Market (Foreign Exchange Market)
The forex market is where foreign currencies get traded. U.S. dollar versus the Euro, Japanese yen versus Sterling, Australian dollars versus Canadian dollars, and so on—it’s all in there. It’s the biggest financial market in the world, and in an average trading day the equivalent of 6 trillion USD is traded there.
Forex (foreign exchange) is all about trading currencies—like betting on whether the U.S. dollar will go up or down compared to the euro. It’s the most liquid market in the world, although the exact liquidity will vary depending on which currency pairs you are trading.
The forex market runs 24 hours a day, five days a week. No lunch breaks. No closing bells. Just constant movement from Monday through Friday. Because of the time zones, the forex market is actually active for more than just 120 hours a week, since trading will start in places like Tokyo and Sydney when it is Monday morning there – even though it is still Sunday in New York City. And when the weekend starts in Sydney and the trading stops, it is still going strong in New York City.
Traders in forex don’t care about dividends or company profits—they’re looking at factors such as interest rates, inflation, central bank decisions, foreign trade numbers, and sometimes just pure momentum. It’s all about which currency is getting stronger against another.
If you like macroeconomics, global politics, or just want something that moves fast 24/5, forex is worth looking at. This 24-hour, five-days-a-week, market is driven by economic news, politics, and global events, and it can provide a lot of action. Central bank meetings, inflation data, geopolitical tensions – so many things can have an impact.
Also: it’s a favorite among leveraged traders. High risk, high speed, high drama. As a novice trader, leverage is best approach with serious caution, because it will boost both profits and losses, and can quickly wipe out your account.
To understand the forex market, you need to start by looking at how currencies are always traded in pairs – such as EUR/USD or GBP/JPY. Buying one currency and using another currency to pay for it – that is the foundation of this market.
Cryptocurrency Market
Welcome to the weird corner of trading, where the rules are still being written, and super high volatility is part of the charm. The cryptocurrency market is not centralized and it never closes. Not on weekends. Not on holidays. Not even on Christmas or the Chinese New Year.
You can trade well-known cryptocurrencies like Bitcoin, Ether, Solana, and Dogecoin, or take yuou chance with thousands of other coins and tokens—some legit, some barely holding on. It’s a wild ride.
Prices are driven by a variety of factors, including hype, tech, adoption, regulation news, and sometimes a single tweet. The cryptocurrency market is full of retail traders who sometimes manage to move markets with memes and chaos. If you’re okay with risk and have a stomach for the rollercoaster, cryptocurrency can be great. But you’ve gotta stay sharp—rug pulls, hacks, and sudden crashes are still part of the game.
Crypto is in some ways its own weird, wonderful universe, but the trading styles are similar—day trading, swing trading, position trading — and long-term investors are also present. You can trade spot (at the current market price), or use derivatives such as futures and options on certain platforms.
A lot of newer traders start in cryptocurrency because the barrier to entry is low and the crypto market has gotten a lot of attention in the last 10 years. But don’t let the hype and the casual entry fool you. Crypto can chew you up and spit you out, and you need to adhere to suitable risk-management routines to stay in the game.
Note: If you do not want to actually buy and own cryptocurrency, or even register at a cryptocurrency exchange, you don´t have to. You can still get exposure to the currency exchange rates through one of the many traditional online brokers and trading platforms that offer speculation on cryptocurrencies. You can for instance used Contracts for Difference (CFDs) to bet on both crypto-crypto pairs and crypto-fiat pairs.
Commodities Market
Now we’re talking about stuff—oil, gold, silver, coffee, wheat, natural gas, even frozen orange juice. Things that are mined, extracted or grown. The idea is not to actually get barrels of oil or bags of corn delivered. Instead, you trade contracts that track the price of these physical goods.
The commodity market is tied closely to the real economy. If a hurricane hits the Gulf, oil prices might spike. If a cold weather front hits coffee crops in Brazil, coffee prices climb. It’s supply and demand, but the numbers are of course stirred around by plenty of market sentiment, and reading the market is not as straight-forward as one might think.
It is important to remember that each commodity runs along its own course. Gold’s a classic hedge, and the gold price tend to rise when markets are stormy. Oil’s volatile and political, and there is more than one type of crude oil to take into account. Coffee harvests are sensitive to droughts and chills, and if if bad weather hits the coffee regions of Brazil or Vietnam it can have a huge impact on the commodity price of Arabica beans, since these two countries are the major producers. Since each commodity is unique, many traders specialize in just one—like oil or gold— at least to begin with. Mastering just one commodity instead of jumping on every opportunity can give you the edge you need to stay consistently profitable.
Commodities are physical goods—oil, gold, corn, coffee, natural gas – but you are trading contracts that track the price of these things, not the goods themselves. This can make it all feel a bit disconnected from reality, but make no mistake – commodity trading is always connected to the real-world. Weather, war, supply chains—all of it matters. Prices can spike from a coup in West Africa or a pipeline explosion in Europe.
Index Speculation
An index usually tracks a basket of assets. A stock index tracks a basket of stocks, a forex index tracks a basket of currencies, and so on.
You can gain exposure to in index in many different ways, including futures contracts, options, and exchange-traded funds (ETFs).
Examples of well-known stock indices are S&P 500, FTSE 100, and DJIA. A stock index represents many stock companies at the same time, and speculating on a stock index is like betting on the direction of the group instead of picking individual stocks
Examples of Financial Instruments
There’s a wide range of financial instruments available for trading. These instruments act like vehicles for your bets: up, down, sideways… whatever you think is going to happen. Each instrument has its own flavor. Some tend to move fast, some tend to move slow. Some are more risky, some are less risky (but there is always risk). Depending on what kind of trader you are, and what your trading strategy looks like, some will fit better than others.
Below, we will take a look at few well-known financial instruments used by traders.
Stocks (Equities)
This one’s the classic. When you buy stocks, you’re buying a slice of a company and becomes part owner. It could be something massive like Microsoft or Apple, or a tiny biotech firm no one’s heard of yet.
Stock trading can be very emotional. People love or hate companies, follow news, tweet opinions, and sometimes cause wild swings with nothing more than a Reddit post. That’s what makes them fun—and risky.
You can trade them short-term or hold them for years, hoping they grow in value and/or pay dividends. They’re the go-to instrument for beginners because access is easy and the learning curve is manageable. But don’t let that fool you. Stocks can still crush you if you’re not careful. Just ask anyone who got FOMO and panic-bought at the top.
Penny stocks
Penny stocks are stocks with a low price tag. There is no global definition available, but the U.S. Securities and Exchange Commission (SEC) use the term penny stock to refer to a financial instrument that is issued by a small public company and is trading at less than $5 per share.
Inexperienced traders are often attracted to penny stocks, since it is possible to buy a fairly large number of penny stocks even on a small budget. Before you jump into penny stock trading, it is important to be aware that penny stocks tend to be highly volatile and there is also an increased risk of the company becoming insolvent. There are underlying reasons why this public company is traded at such as low value, and when you understand those reasons, you will also understand why you are taking an especially big risk when you put your money into penny stocks.
It is also important to be aware that penny stocks are a favorite among fraudsters running pump-and-dump schemes. When the total market capitalization of a company is low, it doesn´t take much money to impact the price a bit – making it look like the stock is about to take off. Fraudsters will accompany this with a campaign where they encourage traders to invest “in the next big thing”, e.g. through newsletters, in chat rooms, in social media, and through the use of influencer marketing. The fact that the stock is still low priced makes it even easier to pull in suitable victims, who feel that they finally have a chance to get in on the ground floor and get rich in the stock market. Many people who fall victim to pump-and-dump schemes have no prior experience in active stock trading. As people begin to buy shares in the company, the stock price rises, and this “confirms” that the promoters were right. Now, people who were a bit hesitant before want to get in on it too, and become anxious to lose out on this great deal. Soon, the snow ball is rolling, pulling more and more people in. But the fundamentals are not there, and a crash will happen. The fraudsters purchased a large amount of penny stocks earlier, and will sell them when the price have reached their target – or when they notice signs of the scam beginning to lose momentum. The fraudsters selling their position can be enough to cause a significant drop in share price, which in turn trigger others to sell as well. A downward spiral has begun.
Blue-chip stocks
Blue-chip stocks are shares in very large and well-established publicly traded companies. For many investors, they form the basis of their stock portfolio, since they are considered dependable – and quite a few of them also pay dividends. Traders, including short-term traders, can also be interested in blue-chip stocks, i.e because they tend to be highly liquid.
Examples of blue-chip companies:
- BAE Systems
- CocaCola Co
- Logitech
- Chocoladefabriken Lindt & Sprüngli
- Amcor
- Roche
- Unilever
- Hexagon AB
- Caterpillar Inc
- American Express
- Chevron Corp
- McDonald´s Corp
- Pentair
- IBM
- 3M
- Equifax
Bonds
As we talked about above, a bonds are basically IOUs. You lend money to a government, municipality, or corporation, and they pay you back later. While you hold the bond, you get interest payments. Not exactly adrenaline-pumping stuff, but bonds are a big deal in trading circles, especially when interest rates start shifting.
Traders speculate on bond prices or yields, especially in times of inflation or economic uncertainty. You’re not in it for a moonshot. You’re in it for stability—or big macro trades.
Exactly how risky a bond is considered to be will depend on the creditworthiness of the issues (the entity that wants to borrow your money). A rich and stable country sovereign state like the United Kingdom can issue bonds with a fairly low interest rate and still have the market clamor for them, since they are considered such a trustworthy borrower. Argentina on the other hand, needs to pay a significantly higher interest rate to attract market interest in their bonds.
Gilt (UK)
In the United Kingdom, bonds issued by the government are known as gilts, because they have traditionally featured gilded edges. Newer issues are called Treasury Gilt, while older issues have other names, including Treasury Stock. Compared to most other countries in Europe, the UK gilt assortment includes bonds with very long lifespans.
Gilts were traditionally issued by the Bank of England, but since 1998 gilt issuance has been handled by the UK Debt Management Office (DMO), which operates under His Majesty’s Treasury.
In September 2021, the UK Debt Management Office sold the first batch of UK green gilts, a sale that brought in over £100bn in bids for 12-year bonds with a maturity date in July 2033 and a yield of about 0.9%. The money raised through the sale of green gilts is earmarked by green spending, e.g. renewable energy projects, flood prevention, and carbon capture.
T-bonds (USA)
The U.S. Treasury offers several different bond types, and the treasury bond with the longest maturity – from 20 years to 30 years – is the T-bond, also known as the long bond. T-bonds have a coupon payment every six months. In 2019, the Treasury Secretary announced that the Trump administration was considering issuing 50-year and even 100-year treasury bonds, but at the time of writing, this has not yet happened.
T-bonds are sold by the government through an auction system, and can then enter the secondary market. Investors who want to purchase bonds directly from the U.S. government can use TreasuryDirect.gov, a website run by the Bureau of the Fiscal Service under the United States Department of the Treasury.
Municipal bonds in the U.S.
The U.S. municipal bond market is small compared to the markets for corporate bonds and Treasury bonds, and it is not very liquid. The number of municipal bond issuers is also much higher than the number of corporate bond issuers, making the market more diverse. In the United States, both states and local governments can issue bonds, and bonds can also be issued by entities created by states or local governments, e.g. authorities and special districts.
Just like the group of issuers is more diverse for municipal bonds, the group of investors is more mixed, and much less dominated by institutional investors. Municipal bonds will typically come with preferential tax treatment for the yield in an effort to attract investors. It is common (but not mandatory) for municipal bond yields to be exempt from federal and state income tax, and investors in high tax brackets can benefit from purchasing tax-exempt municipal bonds instead of bonds where the yield is taxable income. In 2020, roughly 80% of the trading volume for U.S. municipal bonds consisted of tax-exempt bonds.
In the 21st century, efforts have been made to make the municipal bond market more liquid in the U.S. and encourage trade in municipal bonds, but the results have been weak so far. One of the factors that is believed to hold back individuals from entering the market are the high minimum investments. While you can start buying stocks with just a few hundred dollars in your broker account, municipal bonds typically have minimum denomination buy-ins in the $5,000 range, unless the issuer is very small and eager to attract local investors.
The three basic types of municipal bonds in the U.S. are general obligation bonds, assessment bonds, and revenue bonds. On a general obligation bond, principal and interest are secured by the full credit of the issuer, which typically includes the issuers taxing power. This is generally seen as the most secure type of municipal bond. Assessment bonds are tied to property taxes, although some bonds labeled assessment bonds give the issuer a wider obligation to repay and are thus more similar to general obligation bonds. This showcase the importance of reading the fine print before investing. Revenue bonds are secured by a specified stream of future income. This type of bond is often issued to finance projects such as bridges, airports, hospitals, and water treatment facilities.
ETFs (Exchange-Traded Funds)
ETFs are like stock baskets. Instead of buying just Apple, you can buy an ETF that holds Apple, Microsoft, Google, and a bunch of others—instantly giving you some built-in diversification.
ETF stands for exchange-traded fund. With a classic mutual fund, shares are normally only traded once a day. With an exchange-traded fund, the shares are listed on an exchange, e.g. NYSE, and traded throughout the trading day in a manner very similar to stock trading.
ETFs can be great for people who don’t want to micromanage and hand-pick every company in their portfolio, but still want to be in the game and be able to buy and sell fund shares quickly. ETFs can be used for both very active short-term trading and chill long-term investing for your retirement.
ETFs are available for many different niches, so you can select which type of exposure you want. Maybe you want to invest in an industry like health care? Maybe an index ETF that tracks the FTSE100? Maybe you want to put your money into green tech? Maybe an ETF that invests in companies in emerging markets, or a specific country or region?
Options
Options give you the right (but not the obligation) to buy (call option) or sell (put option) an asset at a specific price before a certain date. With exchange-traded options, you’re trading contracts, not the asset itself, and the option will always be cash-settled. If company that actually needs to have barrels of oil or sacks of cocoa beans delivered at a certain date needs another type of contract, and the same is true if you actually want to become the owner of the underlying stocks for a stock option.’
Traders use commodity options for speculation and hedging, As mentioned above, options come in two types: call options (betting the price of the commodity goes up) and put options (betting it goes down). Options therefore let you trade based on where you think the price is going, without owning the actual asset. You’re buying the right (but not the obligation) to buy or sell something at a certain price later.
Options are powerful but not for the easily confused. They come with terms like strike price, expiration, time decay, and implied volatility. It’s like regular trading turned into chess. But once you get it, it can be used for complex strategies. Options tend to attract a very particular type of trader: part math nerd, part poker player. Risk is capped, but time decay and complexity add layers of challenge. Mastering options takes time. But once you get it, it opens up some powerful plays.
You can trade options on a wide variety of underlying asset types and financial products, including stocks, ETFs, indices, cryptocurrency, and more. They’re flexible and creative—but absolutely not casual.
Options can be used in almost any style—day trading, swing trading, or longer holds—but they have their own rules and risks. And when they go wrong, they often go wrong fast. They’re complex and powerful. If you’re gonna trade options, be ready to learn fast and manage risk in several dimensions.
Binary options, also known as over/under option, is a “special” type of options that are extremely high risk and that has been banned in many juristictions. I recommend that you visit binaryOptions Net if you want to leanr more about binary options.
Futures Contracts
Futures contracts are agreements to buy or sell something—could be oil, wheat, coffee, whatever—at a fixed price on a future date. Unlike the option, a futures contract binds both parties. You have a both a right and an obligation to carry out the transaction.
Futures contracts are highly standardized and traded on exchanges. (Entities that need something more tailor-made use forwards instead.)
Futures contracts are cash-settled. You’re not actually entitled to to take delivery of 10,000 barrels of crude oil. You’re trading the price movement between now and that contract’s expiration.
Futures are fast, leveraged, and demand precision. Traders love them for the liquidity and control they offer, especially when trading indexes or commodities. They are popular with serious traders, who want tight spreads and plenty of volume. But they’re not beginner-friendly. One wrong move and you’re staring at a margin call instead of a profit. Still, if you’ve got experience and control, futures can be what you need to speculate on an extremely wide range of things—commodities, currencies, indexes, even weather (no joke).
Cryptocurrencies
If you like volatility, cryptocurrency where it’s at. Crypto trades 24/7 and is known for insane price swings. One tweet, one regulatory rumor, one whale move, and prices can shoot up or fall off a cliff. It’s chaos, but in a weird way, it makes sense to a certain kind of trader.
Just as on the forex market, the cryptocurrency market is built on pairs. You can trade crypto-crypto pairs (e.g. BTC/ETH) or crypto-fiat paris (e.g. BTC/USD).
You can trade spot (current market price) or use cryptocurrency derivatives, including futures and options.
Examples of well-known cryptocurrencies:
- Bitcoin (BTC)
- Ether (ETH) at the Ethereum network
- XRP (XRP) at the Ripple network
- BNB (BNB) issued by the cryptocurrency exchange Binance
- Solana (SOL)
- Dogecoin (DOGE)
Shares in Real Estate Investment Trusts (REITs)
This one’s a little different. You are getting exposure to real estate but not by buying physical property—you’re trading shares of Real Estate Investment Trusts that own, operate, and/or finance real estate. Real Estate Investment Trusts (REITs) are a way to get exposure to property without the legal responsibilities and liabilities that comes with owning real estate outright. Great for diversification or if you want to profit from being a landlord but without the stress.
REITs trade in a fashion similar to stocks, but their behavior is tied to real estate performance. Some focus on malls. Others on data centers. Some on apartments. Some take a mixed approach to diversify. REITs usually pay solid dividends and attract income-focused traders, including people who want to create a flow of revenue for retirement.
CFDs (Contracts for Difference)
A Contract for Difference (CFD) is a contract between you and your broker. You are not trading on a market filled with other traders – you are making a bet with your broker as the counterpart. CFDs are available for a wide range of underlying asset and financial product types, including stocks, forex, cryptocurrency, indices, and commodities.
CFDs offer a lot of flexibility when it comes to stake, underlying asset, leverage, and time-frame. They’re popular with retail traders because they’re flexible and accessible, but the fees and risk levels can get sneaky. If you’re using them, read the fine print. Twice. Do not forget that your broker is also your counterpart in the trade, so there is a built in conflict of interest. Serious brokers can handle this conflict in an honorable way, while shady brokers can be tempted to manipulate prices on the platform to enrich themselves. With CFDs, it is even more important than normally to pick a broker that is regulated by a strict financial authority that have strong trader protection rules in place, supervise brokers in an efficient manners, and is bestowed with both the resources and the legal muscles required to investigate brokers and take action when something is wrong.
This article was last updated on: May 5, 2025