Financial assets, what are they?

In accordance with the definition, asset is one of exchange contract types that is used for gaining profit from asset price movement (currencies, shares, goods) on world financial markets. At the moment of purchase, asset buyer makes prediction regarding how the price of his asset will change. This financial instrument has fixed cost, known in advance time of the contract expiration and the amount of potential profit.

Typical example of contract is bet on price increase or decrease. If you guess the price direction correctly, then you receive back the amount of your bet and 80-90% of pure profit. In case of the opposite result, you lose the amount of your bet. Most factors that influence price movement of an asset we use are already known, therefore, it is much simpler to predict the price movement direction. We do not have to guess the direction. It is enough to correctly analyze the markets and accessible economic information.

Asset trading has a lot in common with Forex trading. It is about both applied strategies and trading instruments. If you already have Forex trading experience, then it will be way easier to understand asset contracts principles. The majority of Forex strategies and indicators can be applied for financial instrument trading. In fact, any trading on financial markets requires definite initial skills. There is nothing difficult in the trading process itself. You buy a contract and in compliance with its conditions you either obtain the profit that is more than its cost or nothing. That is exactly what the large advantage of financial instrument contracts is all about, everything is simple and rather transparent. Also, there is no need to support positions. You know all risks in advance, the contract will be automatically closed by the time of end of its expiration term.

Advantages Of Financial Instrument Trading

  • Stability of profit: depending on the expiration period, you know exactly how much money a certain transaction will bring.
  • Risk control: the amount of your loss will never exceed your deposit on the transaction. In financial instruments, "stock drawdowns" which can drown the entire amount on your trading account while trading on stock market are not possible.
  • Training: the success of investing in assets does not require special education. It is mainly enough to understand the principles of elementary ABC analysis and to have access to the news resources of the financial market. Analytical assessment of the trend will help you to understand the principle of determining the movement of quotes and to make the right choice.
  • Independence: Quotations for financial instruments are available around the clock, 7 days a week as they are generated by rating agencies. Thus, there is no need to wait for the open time of major world stock exchanges.
  • Risk hedging: you can diversify the risk of possible losses by hedging other trading positions that you have available at hand either in currency, shares or gold.