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Forex is short for foreign exchange and is sometimes also referred to as FX or the currency market. It facilitates international investment and trade by allowing us to convert one currency to another. Forex is traded in pairs, which means that you are simultaneously buying one currency while selling another.

The prices of the currency pair indicate the amount of the quote (or counter) currency that one unit of the base (or primary) currency is worth. As the largest financial market in the world, it is important not just for individuals and businesses, but also for financial institutions, central banks, and governments.

It is an over-the-counter (OTC) market, where trades take place directly between two parties rather than through an exchange. The forex market is run electronically with no central location, so trades can take place anywhere and anytime via a forex broker of your choice. Forex is traded in standard lots representing 100,000 units of currency.

There are a large number of market participants looking to trade forex at any one time, which means that it is one of the most accessible markets out there. Currency rates are consistently volatile, so you can earn a lot, but also risk losing just as much in a short amount of time due to speculative trading.

Forex allows you to trade on the margin which essentially means that you can trade with borrowed money, though this may also be a double-edged sword. Brokers typically charge relatively competitive commission fees, and there are usually no additional fees involved.

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A share is a unit of ownership in a company. Companies offer shares as a method to raise capital, which they usually then reinvest back into the business. Share prices are determined by the supply and demand of the share itself.

The main factors that influence these changes in supply and demand are expectations about the market, the company and the general economy, as well as the financial performance and earnings of the company in question.

Shares are mostly traded on major stock exchanges (e.g. New York Stock Exchange). Investors trade through a stockbroker. Investors can instruct a broker to carry out their instructions, take advice from the broker to make their final decision, or entirely leave the trading up to the broker.

Shares are liquid (easy to buy and sell), so you can convert your shares to money easily. Shares also provide regular dividend earnings that the company usually pays out. Besides dividends, share prices tend to have higher rates of return than other financial products (e.g. bonds).

Stocks are easy to diversify, which reduces your risk exposure. Trading in shares involves higher risk, as shifts in share prices can be volatile and sudden (because it is driven by expectation). As a result, positive returns are not guaranteed.

Share prices and dividends are also dependent on a company’s financial performance, which could be poor. Making a wrong investment due to poor judgement would be costly as a result.

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A stock index is a measurement of the value of a certain section of the stock market. It is generally calculated based on a capitalisation-weighted (where companies with larger market share have more influence) or a price-weighted system (where shares with the higher prices have more influence).

Major stock indices can indicate the health of the equity market (and sometimes the whole economy) of a particular country or region. Most nations have one major index, but the US has three: the Dow Jones Industrial Average, S&P 500 and NASDAQ-100.

You cannot invest directly in a stock index since it is just a measurement value. Rather, you invest in specialised products that are designed to mirror the performance on the stock index.

Index fund:

A specialised investment fund that attempts to replicate the movements of a particular stock index
They are usually managed by a fund manager, who you invest through their funds

Exchange-traded fund (ETF):

A type of index fund that can be traded like a stock on an exchange
The prices of ETFs are thus dependent on demand and supply, so they fluctuate over a trading day as they are bought and sold

Derivatives:

Financial products whose value is based on the performance of an underlying instrument (in this case, the stock index)
Examples include futures, options, digital 100s or contracts for difference (CFDs)

For index funds and ETFs, they are low-risk because they are diversified portfolios (just like the indices they mirror). They also generally cost less as they are passively managed. They are good for long-term investments as historically, the indices that the funds track usually perform well.

ETFs are more liquid and flexible than index funds, as they can be traded like stocks. Individuals have no controls of what goes into the fund, which might dissuade those who want the freedom of choice.

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Commodities are physical assets that are farmed, mined, or extracted from the earth. They can be further categorised into soft commodities (agricultural) or hard commodities (energy and metals), with the former being more volatile due to their lack of durability and reliance on external factors.

Commodities are traded on either the spot or futures market. There are 2 main markets: the spot market is generally used to trade physical commodities, while the futures market is typically dominated by speculators and hedgers dealing in contracts. 4 main groups of people trade commodities, namely - producers, speculators, hedgers and brokers.

Commodities are traded on special exchanges in contracts. Contract sizes will vary depending on the type of commodity traded, with most being relatively large. However, smaller investors can buy and sell commodity futures using leverage.

There may be higher growth opportunities depending on the changes to demand and supply, which in turn allows for significant income from time to time. Speculation and hedging is rampant in the futures market where people trade contracts rather than the physical commodities, resulting in greater volatility and higher risks.

Commodity prices can also be very volatile as they are affected by supply and demand, the weather, geopolitical factors, the value of the US dollar, and so on. Smaller traders can often trade commodity futures on leverage, which means that they can borrow money for larger trades at the expense of higher risks.

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Cryptocurrency is a type of digital or virtual currency. Trading cryptocurrency involves buying and selling the underlying coins via an exchange or trading on cryptocurrency price movements without taking ownership of the underlying coins.

It is a decentralised currency, which means that it was developed to be free from government oversight or influence, and is instead monitored by peer-to-peer internet protocol. Cryptocurrencies are not widely accepted by consumers and businesses, as they are too volatile to be suitable as methods of payment.

Cryptocurrency can be traded on basis of price movements through a CFD contract (Contract for Differences) traded through our liquidity channels. If you are looking to buy (and own) the cryptocurrency itself, you will need to set up an account with a cryptocurrency exchange. However, owning cryptocurrencies do not allow you to establish short-selling positions.

Build a trading plan that includes risk management tools, an outline of your goals, your chosen trading platform, a trading strategy, and so on. Open the deal ticket for your chosen market, monitor your position, and close accordingly.

Cryptocurrencies are not regulated by the Monetary Authority of Singapore (MAS), so buyers do not have the relevant legislative protection. These are leveraged products, so you only need to put up a small deposit (known as margin) to gain full exposure to the underlying market, though this will also amplify both profits and losses.

Cryptocurrencies are notoriously volatile, which makes it crucial for traders to learn and know what is likely to move the market. That said, cryptocurrencies like bitcoin offer impressive transparency as the transactions themselves are all stored on an open ledger (the blockchain), so the data is available to anyone at anytime. It is also completely anonymous, which is excellent for people who value their online privacy and are cautious about handing over too much of their digital data.

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