Potentially Profitable Markets to Trade and Why

Potentially Profitable Markets to Trade and Why

Reading time: 7 minutes

New traders often fall for the millionaire fallacy, hoping to hit big and retire early following the self-proclaimed wisdom of digital gurus and day trading communities.

This isn’t reality, but that doesn’t mean trading can’t be profitable for those that make the right decisions and implement the right trading strategies.

One of the first decisions involved in placing a trade is picking the right market to trade, so let’s look at some of the most potentially profitable markets and why they could make a good pick for your trading portfolio.

Forex Market

As online trading became increasingly popular and accessible to the masses, the degree of assets available grew alongside it. There's an abundance of available liquid assets that can be traded, and it largely depends on the broker of your choice and sometimes the entity’s jurisdiction.

First and foremost is the forex market, an abbreviation of the Foreign Exchange Market. This is the most popular market for the surging wave of retail traders, normally due to the leverage on offer from forex brokers and the massive online community surrounding it. Interestingly, in 2022, the daily turnover from forex trading averaged approximately $7.5 trillion.

This includes major currency pairs like EUR/USD, GBP/USD and USD/CHF, and cross-currency pairs (or crosses) like the AUD/CAD. Whilst currencies from highly developed economies are the most widely traded, many brokers offer more exotic pairs like USD/TRY, USD/ZAR or EUR/MXN, pairing highly performing currencies with smaller, more emerging economies. These pairs can be highly volatile and should be traded with caution. However, they can be profitable markets if traded with a solid risk-management system and a back-tested trading method. With FP Markets, you can trade a broad mix of Major, Minor and Exotic currency pairs, all with tight, competitive spreads.

Looking further afield, let's explore some of the other primary profitable markets on offer.

Primary Profitable Markets to Trade

Asking someone about trading or investing who isn’t clued up on the vastness of the financial markets might result in one particular focus - the stock market. Historically strong, the stock market has helped build entire economies while fostering continued growth amongst its constituents. Shares of stocks used to be physically bought and sold within the famed walls of international stock markets like the London Stock Exchange or the New York Stock Exchange. Following the technological revolution, many traders moved digital, with many online brokerages opening and birthing the world of the stay-at-home retail trader.

Now, traders can access an endless range of listed companies and can purchase and trade shares in them from the comfort of a laptop or mobile. Stocks can be incredibly profitable but are generally seen as a more long-term investment based on economic speculation. This means short-term or immediate profits might be few and far between but if a trader buys low-priced shares at an early stage, they can benefit strongly as the company evolves and the share price increases.

Stocks nowadays aren’t just bought and sold. The derivatives market means traders can use CFDs (Contracts for Differences) to speculate on the underlying price movement. This means that by purchasing a CFD, a trader doesn’t actually own the underlying asset and can speculate long or short, meaning profit can be taken from both sides rather than for just growth. The derivatives market amplifies the potential short-term profitability of stock trading as profits can be taken from an increasing and decreasing share price.

The commodities market is one of the most volatile, value-laden and profitable markets to trade. These are the raw materials that modern societies depend on, precious metals like gold and silver, agricultural products like coffee and wheat, or oil and natural gasses for harnessing global energy resources. The alluring thing about the commodity market is its volatility. Due to the price of commodities being tied to global security and economic welfare, sparks of uncertainty or changing government policy or interest rates can result in severe price changes. If you’re prepared, that can be incredibly profitable.

Tips For Trading Markets Online

There are endless tips and tricks to help trade the markets successfully, tying into the first point - knowledge is key. Even the most successful traders will tell you that the learning is never over, nor will there ever be a point where you’ve learnt enough. The more knowledge you gain, the more you can apply it to your endeavours and continue developing expertise.

A second critical part of being successful is risk management. Only risk what you can afford, and make sure your take profit is ambitious but safe with a tight, no-nonsense stop loss. Of course, everyone has their strategy, but just keep those losses small.