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Choosing The Right Asset Class For Trading (Trader Poll)

Last Updated on 17 February, 2024 by Abrahamtolle

Because backtesting is the cornerstone of this website, we occasionally make a poll among our Twitter readers.

Choosing the right asset class for trading plays a significant role in shaping trading strategies, risk, and profits. To get better insight into the preferences of traders on social media, we ran a recent poll. We asked:

Which asset class do you prefer trading?

The poll revealed intriguing statistics that shed light on the diverse choices investors make when trading. Let’s look at the results.

We have conducted plenty of reader polls, and you find them all in our article about trading strategy statistics, truths, realities, and facts

We comment on the results from our Twitter poll:

Stocks and ETFs: The Top Choice

Leading the pack with a significant 47.6% of the vote, stocks and ETFs are the preferred asset class for a substantial portion of the respondents.

These traditional investment vehicles represent ownership in companies, providing investors with a share in a company’s profits and losses. ETFs, or exchange-traded funds, are a popular option for diversifying investments across multiple stocks, offering an efficient way to track various market indices.

We believe these traders are smart. Why? Because you have a tailwind in the form of inflation and productivity gains. Stocks and related ETFs go up, barring a revolution and/or wars on home soil. You can take advantage of this effect.

These characteristics make them a reliable choice for long-term investors, as well as short-term traders.

Futures: A Strong Contender

Futures trading, with a 38.1% share of the poll, emerged as the second most popular asset class.

Futures are derivative contracts that obligate parties to buy or sell an asset at a predetermined price and date. They offer traders the potential for substantial profits but also carry significant risks.

The appeal of futures trading may lie in the leverage they provide, enabling traders to control a larger position with a relatively small amount of capital. This can magnify gains, but it also exposes traders to amplified losses if the market moves against their positions.

As a result, futures trading typically attracts more experienced traders who understand the complexities and risks involved.

Crypto: Gaining Traction

Cryptocurrencies, a relatively new entrant to the financial markets, garnered 7.9% of the vote in the poll. Cryptocurrencies like Bitcoin, Ethereum, and a multitude of altcoins have captured the attention of traders and investors around the world due to their potential for rapid price appreciation.

Crypto trading is known for its volatility, with the market’s value soaring and plummeting within short timeframes. The appeal of cryptocurrencies likely stems from their potential to generate substantial gains in a short period, as well as their decentralized and innovative nature.

We have not yet delved into heavy crypto trading. But for those interested, we have written a few articles about crypto strategies:

Forex and CFDs: Niche Preferences

Forex (foreign exchange) and CFDs (contracts for difference) received the lowest preference in the poll, with 6.3% of respondents favoring this asset class. Forex trading involves the exchange of one currency for another in the global foreign exchange market, while CFDs are derivative contracts that enable traders to speculate on the price movements of various assets, including stocks, commodities, and indices.

The lower preference for Forex and CFD trading may be attributed to the complexity and unique skill set required for success in these markets. Forex trading involves understanding global economic factors and geopolitical events, while CFD trading can involve high leverage and exposure to various markets, requiring a sophisticated approach to risk management.

However, the low requirements for margin might be another factor that many beginners get drawn to these two markets. The truth is that most forex and CFD traders get wiped out in a short period of time.

We like to think that we have followers who know a great deal more than the average beginner. Thus, we have fewer traders trading forex and CFDs?

Conclusion

Stocks and ETFs emerged as the dominant choice, thanks to their stability and transparency.

Futures trading came in a close second, appealing to traders who are comfortable with leverage and risk.

Cryptocurrencies, with their volatility and potential for rapid gains, captured the interest of a smaller but enthusiastic group of traders.

Meanwhile, Forex and CFD trading, with their unique complexities, were favored by a niche audience.

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