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Trade different asset classes on eToro
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Trade different asset classes on eToro

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Beginners•8 min
Trading

Want to discover what the main CFD asset groups are? This article explains the main asset groups used by CFD traders.

One of the benefits that CFDs offer is the ability to access different types of investment with one trading account. Investments of a similar type are called asset classes or asset groups.

Key CFD asset groups

Here is a list of the main CFD asset groups:

Currency CFDs

Also known as Foreign Exchange, Forex or FX, currency CFDs allow you to speculate on the strength of one country’s currency against that of another. For example, the GBP/USD currency pair changes in value according to the exchange rate of how many US dollars one British pound is worth.

Stocks and ETF CFDs

CFDs represent a convenient way of trading the share prices of companies listed on stock markets and you trade at the best price available on actual stock exchanges. 

ETFs (Exchange-traded funds) are a basket of securities compiled into a fund that can be bought and sold just like a stock. The securities within the ETF are selected to offer a particular type of exposure to an investor. For example, the SPY ETF is intended to track the performance of the US500 Index, while the PPLT ETF aims to reflect the performance of the precious metal platinum.

Index CFDs

A stock index is a benchmark whose level is derived from the value of a specific basket of stocks, used to track the performance of certain parts of the economy. For example, the UK100 Index tracks the value of the UK’s leading publicly traded companies by market capitalisation.

Index CFDs allow you to trade the value of a wide selection of top stock indices from around the world with the same convenience as trading a stock CFD.

Commodity CFDs

A widely varied group of raw materials and agricultural products fall under the heading of “commodities.” Under that broad umbrella there are sub-groupings, including energy markets (such as crude oil or heating oil), grains (such as wheat or corn) and metals (such as gold or silver).

Cryptocurrency CFDs

Cryptocurrencies have surged in popularity as an investment over the last decade. Trading them as a CFD allows the convenience of accessing these popular markets via a regulated broker. 

Identifying trading opportunities by CFD asset group

Different asset classes will be influenced by different factors in different ways and this means that each CFD asset group may offer their own particular trading opportunities.

For example, if one country’s economy outperforms another, currency CFDs offer a way to take on an exposure to the two currencies in question.

Also, the way investors perceive levels of risk can drive them to different assets:

  • Geopolitical tensions or conflicts in commodity-rich regions that threaten supply disruption have the potential to create sharp, short-term price changes in the affected commodities.
  • Elevated concerns of risk can help to push money flows into assets perceived as safe havens.
  • Gold has historically been considered a safe haven, and also a hedge against inflation, although the empirical evidence is arguable.

Monetary policy also shapes money flows. If a central bank sets low interest rates, investors may seek out riskier assets in the hope of higher returns. The low interest rate environment of the 2010s helped to fuel substantial stock market gains, for example.

Final thoughts

CFDs offer access to a broad assortment of assets. With a single CFD account, you can trade not just thousands of different shares, but stock indices, currency pairs and commodities from around the globe.

Deepen your understanding of trading by visiting the eToro Academy.

Quiz

True or false: disruptions in the supply of a commodity cannot lead to a sharp move in its price?
True
False
 

FAQs

If I trade a share CFD, does the CFD price move with the actual share price?

Yes, the price of a share CFD is derived from the underlying share and will rise or fall in line with the share price on the relevant exchange.  

If I buy a CFD in a certain asset class, do I own the underlying asset?

No, CFDs are contracts whereby you settle in cash the change in value between the opening and closing levels of your position.

Are gold and silver the only metals I can trade as a CFD?

No, you can trade a variety of other precious metals, including platinum and palladium, as well as the price of base metals, such as zinc, nickel and lead.

This information is for educational purposes only and should not be taken as investment advice, personal recommendation, or an offer of, or solicitation to, buy or sell any financial instruments.

This material has been prepared without regard to any particular investment objectives or financial situation and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Not all of the financial instruments and services referred to are offered by eToro and any references to past performance of a financial instrument, index, or a packaged investment product are not, and should not be taken as, a reliable indicator of future results.

eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this guide. Make sure you understand the risks involved in trading before committing any capital. Never risk more than you are prepared to lose.