Hottest  Markets for CFD Trading in 2020’s Q4

Considering 2020 had been a wild year for CFD traders, several markets stood out in terms of their performances. CFD trading requires a lot of precision and accuracy, things can be achieved only when the price of an asset has a directional bias.

Traders need volatility and because of that, they constantly look after trading instruments that already have optimal performance. Now, do you want to know where CFD trading has worked so far this year?

Precious Metals

The combination of aggressive central bank monetary policy and fiscal stimulus had been a major drag on fiat currencies, but instead, had favored precious metals, in particular gold and silver. CFD trading on these instruments is convenient even for retail traders, now that brokerage houses like Q8 Trade are supporting them and provide competitive trading costs.

Gold had been in the spotlight for the entire year as its price accelerated on the upside, but what most of the people were not aware of is that the asset started to move higher since the end of 2018 when stock markets around the world slumped. In January 2020, gold started to trade around $1,500 and it had managed to break above the September 2011 high, before entering a corrective phase that continues.

Even though the COVID-19 pandemic is expected to be a done deal by the end of 2021, the economic damage generated will keep monetary accommodation and fiscal stimulus around the same levels, which means gold, silver, and other precious metals can continue to be very active.

Stock Markets Indices

Due to increased volatility, CFD trading had become an increasingly challenging activity, especially for stock market traders. Stocks are low-liquidity instruments and combined with volatile conditions, placing accurate trades is a real test even for experienced traders. As a result, CFD trading on stock market indices had picked up and continued to be trending among retail traders. This is another asset class that benefited from directional bias, both during the March selloff and during the rebound that’s still unfolding.

Indices carry the advantage of small spreads and reduced daily ranges, facilitating short-term and swing CFD trading. Q8 Trade and other brokers are fully aware of this growing trend and because of that, had been adjusting their trading offer to make indices CFD trading more convenient for their clients. As long as interest in stocks will remain elevated, indices are other instruments to keep an eye on during 2020.

US dollar-Denominated Currency Pairs

As a global reserve currency, the US dollar continues to be critical for the well-functioning of the global financial system. The March panic had led to a dollar funding issue, leading to a spike higher and prompting the Federal Reserve to take the most aggressive actions. As a result, volatility in the FX market spiked higher and currencies were active again.

FX CFD traders were forced to include exotic pairs in their trading list for years in a row, considering major currency pairs had been trading in tight ranges. However, with volatility on the rise in 2020, currency pairs denominated in US dollars had been trending. EUR/USD, GBP/USD, AUD/USD are just some that have generated multiple trading opportunities.

Although 2020 had been one of the most challenging years for financial markets since the 2008 financial crisis, assets had been volatile, and some had been very attractive for CFD traders. The activity is expected to remain elevated as other risk factors could continue to weigh on performance for the foreseeable future, keeping traders and investors on their toes.

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Steve has been living in Saudi Arabia since 2013 and writing about Saudi rules, regulations, guides, and procedures since then.