Best Asset Class for Trading

Hello, I wish to know which is the best asset class to trade in the coming years among FX, Commodity, Equity, ABS ( including CDS, MBS, RMBS, CMBS, CDO etc) etc. so that one could make very good amount of money. I would appreciate if I could get the pros and cons and the comparison related to skills and technical requirements to master trading in these classes, it would not just help me but also the other enthusiast who wish to become a trader some day.

Comments (30)

Jun 4, 2013 - 2:56pm
watersign, what's your opinion? Comment below:

whatever you can afford and whatever is most volatile

apparently currency trading used to be alot more volatile than it is..it seems as of it most 'day traders' are trading FX/Options/Futures so take it for what it's worth but im sure there is a day trader trading weird products, granted he/she is fully funded

alpha currency trader wanna-be
  • 1
Jun 5, 2013 - 2:22am
Munselle, what's your opinion? Comment below:

I trade forex right now. I day trade the NYC london crossover and swing trade the asian london crossover. babypips.com It will help you out big time. For now forget what they say about risk management. You cant use the system everyone prescribes and make money with a small startup account. Also skip the practice accounts and go straight to a live one. Trade small lot sizes and work your way up. If you have any questions lemmi know.

Sep 12, 2013 - 6:24am
ryan007ocm, what's your opinion? Comment below:

Hey Munselle, I am currently spread betting. Mostly on currency. Can you recommend me a good website for spread betting currency? The ones I got in mind atm are IG spread betting and CityIndex. Thanks man.

Jun 5, 2013 - 7:18am
MoneyMonkeyWB, what's your opinion? Comment below:

Thanks for the replies. @Munselle babypics is really amazing! thanx. The question in my mind is how to choose between the class based on the things I like or have the potential to acquire those skills. I am good at numbers, like work with speculations, like to research and the work involving thinking and understanding or brainstorming not running VBA codes (coding is not my forte) all the time! So what could you suggest regarding that. Thanx

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Sep 12, 2013 - 6:25am
erwasd, what's your opinion? Comment below:

Which asset class to trade (Originally Posted: 04/03/2010)

Hi all. So this summer I'm fortunate enough to have a position as an intern in the Trading division of a BB office. I understand that often once you pick an asset class you tend to stick with that for most/all of you career, is this true? We have the opportunity to get exposure to a few different desks. I was wondering what your thoughts on different asset class/products types are, and what factors to consider when choosing one.

I'm more interested in FICC, particularly FX or commodities, but I'm open to anything really since of course I've never really traded on the floor before. Other things I'm wondering are what kind of news really affects each asset class (e.g. rates and politics are more important for FX, while industry news is a much bigger driver for commods). I'm also thinking about whether different asset classes affect your chance to relocate (I would very much like to work in US in the future), as well as how they impact your future options (e.g. moving to a hedge fund). Of course there's also product type (spot, vanilla/exotic options etc.) but I'll leave that for now.

Sorry if these seem like simple questions, but any advice would be appreciated.

Cheers

Jun 5, 2013 - 7:42am
righton1988, what's your opinion? Comment below:
Finance_Tempo:

Thanks for the replies. @Munselle babypics is really amazing! thanx. The question in my mind is how to choose between the class based on the things I like or have the potential to acquire those skills. I am good at numbers, like work with speculations, like to research and the work involving thinking and understanding or brainstorming not running VBA codes (coding is not my forte) all the time! So what could you suggest regarding that. Thanx

I hope you didn't actually go to a site called babypics thinking you were in the right place hahahah.

Jun 5, 2013 - 8:56am
MoneyMonkeyWB, what's your opinion? Comment below:
cheese86:
Finance_Tempo:

Thanks for the replies. @Munselle babypics is really amazing! thanx. The question in my mind is how to choose between the class based on the things I like or have the potential to acquire those skills. I am good at numbers, like work with speculations, like to research and the work involving thinking and understanding or brainstorming not running VBA codes (coding is not my forte) all the time! So what could you suggest regarding that. Thanx

I hope you didn't actually go to a site called babypics thinking you were in the right place hahahah.

Dude sorry for mistake its babypips!
Sep 12, 2013 - 6:26am
GutShot, what's your opinion? Comment below:

don't know much but I can say that many BBs have rotationals where you get a chance to see a variety of asset classes before settling down anywhere in particular...

my advice is to see which products/people you like best and work with those, honestly it's impossible to choose the hot field 10 years from now. it used to be MBS's/structured credit, 10 years ago it was the NASDAQ traders... nobody could've known what was going to happen

Sep 12, 2013 - 6:27am
nauru, what's your opinion? Comment below:

I'm personally not sure how common it is to stick with a single asset class for one's entire career. Many of the people I know have done at least 2 different things -- although normally they are related in some way. So I wouldn't put too much weight on where you end up at the start.

The most important thing is to be around good people who are willing to take time to teach you and who you're able to learn a lot from -- regardless of the asset class.

As has been said, there's no way to predict what's going to be the next "hot thing" so it's kind of pointless chasing your own tail with such matters. Though I'm aware that a lot of newbies get caught up in exactly this kind of thinking so you may feel some pressure to just follow the herd like everyone else. My advice is to try to ignore that.

My .02

  • 2
Sep 12, 2013 - 6:29am
m.c.trader, what's your opinion? Comment below:

If you go Commodities think long term, there's a good chance that Oil Traders in 20 years (assuming the entire world isn't socialist by then) could be very high profile as there is no way we will be able to ween ourselves off of oil before the wells start running out. Not to mention crude is used to make plastics and other materials....there will always be a market for it, and the less there is out there the more money (good) traders will be able to make off of it.

That and Banana Arbitrage

Sep 12, 2013 - 6:30am
tarikad, what's your opinion? Comment below:

i love trading fx it helps you understand all asset classes def look at how the equity mkts and rates mkts are affecting the currency but then again since everything is somewhat correlated to each other i believe you would have to an understanding of everything to be the best at one thing in the end haha

Sep 12, 2013 - 6:31am
Bondarb, what's your opinion? Comment below:

i am biased because its where i started, but i think interest rates are the best product to start with. I think that interest rates are the building blocks of all financial markets and having a good understanding of them has allowed me to trade FX, equity indices, and commodities effectively.

Sep 12, 2013 - 6:37am
LLcoolJ, what's your opinion? Comment below:
Bondarb:

I think that interest rates are the building blocks of all financial markets and having a good understanding of them has allowed me to trade FX, equity indices, and commodities effectively.

could you expand on this? especially the relationship b/w rates and commodities?

Sep 12, 2013 - 6:32am
gimli, what's your opinion? Comment below:

Agree with Bondarb. Rates seem to be a very good product to start with - especially if you enjoy the quantitative aspect of it.

FX is also a good choice since, as tarikad mentioned, you have to look at interest rates (in fact the majority of your trading might involve trading rates), and also have to understand how political events, and movements in equity and sovereign credit will affect fx products. Very few traders trade spot, and most will trade currency and interest rate swaps, futures and options.

Commodity trading is awesome and is a really exciting area. BUT it is very easy to get pigeonholed. For energy for example: one heating oil analyst might be responsible for studying weather patterns across the western region of the US, another for analyzing the transportation routes, etc. Also, regarding your question about relocation: I believe most banks have the majority of their agriculture & energy trading done in the US, and most of their metals trading done in the UK. Someone please correct me if I am wrong.

If you enjoy international exposure, then I would say EM is the best product. EM traders can trade equities, FX, interest rates, credit products, and even commodities as well. You typically start off focusing on one product, and as you get better you can move into other products if you like. I think most EM traders usually focus on either interest rates & FX, or credit. Also, most banks have their New York desks focus on LatAm, their London desks focus on Europe & Africa, and Tokyo/Hong Kong does Asia due to timezone differences. So if you want to focus on a certain region, then location comes into account. Of course you can still trade products for the different timezone if you want to, but you typically have to go through the EM desk that is based in that region.

Regarding your question about moving between asset classes: I would say Rates gives you the most option since interest rates are a component of so many different products. FX & EM should also be good - but you might be limited to other macro products.

Best Response
Sep 12, 2013 - 6:33am
brotherbear, what's your opinion? Comment below:

Gimli's and Bondarb's posts were pretty solid.

I started out trading emerging markets FX, and can verify Gimli's assertion that most EM dealers start with rates or FX. Over time, though, you generally get to trade a wider range of products. All of the desks I have worked on within EM have been multi-disciplinary. The name of the desk may be deceiving, but EM probably gives you the widest exposure to the markets. Why? Because EM dealers trade risk, and risk sentiment manifests itself in a lot of ways. Maybe the risk is in a political election (like, say, the Czeck Republic next month). Maybe it's in poor fiscal management. Maybe it's a downturn in a particular sector that comprises a substantial portion of that particular country's GDP (like shipping in Korea, or commodity prices in most of LatAm/Russia/etc.). Or maybe it's a downturn in a major trading partner's economy.

And how are you going to see what's moving first? You need to be watching equities, and FX, and rates, and commodity prices. You think oil and gas prices don't impact the RUB? You think Chinese growth doesn't impact BRL NDFs? You think Greecian debt doesn't worry investors in Eastern Europe?

Still, I think it's quite hard to start trading EM straight away. The EM space is MUCH less liquid than majors. There are a lot of rules associated with each country. Maybe you can't speculate on the currency, or maybe you can't be net long more than 300 mio MYR without getting in trouble in KL. Maybe you have to deal in the NDF market. Maybe local rates are overpriced due to excess local demand because locals don't have access to major markets. Maybe a certain equity is tanking because insiders (which are much more prevalent in EM countries) are shorting or outright selling their shares.

Regardless, I think it's the most interesting place you can start your career, even if it's one of the hardest.

Sep 12, 2013 - 6:34am
Megashite Trader, what's your opinion? Comment below:

Sounds suspiciously like Goldman's Securities program. If so, the question is to figure out whether you want micro (equities, credit) or macro (rates, fx, EM, commodities). In the former, a lot of idiosyncratic/company specific factors affect flows/liquidity/prices, wheras in the second set the drivers tend to be macroeconomics, monetary/fiscal policies and 'big picture' factors (though gas, power and carbon trading are distinctly micro driven). From there, it's fairly easy to end up on the right desk.

Sep 12, 2013 - 6:35am
by, what's your opinion? Comment below:

Hi guys,

Can you give an example of what EM trader might be doing day-to-day? What does he trade? Any examples would be very appreciated.

Thanks a lot

Sep 12, 2013 - 6:36am
Megashite Trader, what's your opinion? Comment below:

EM traders aren't really that different to trading products in developed geographies - it's just that the job involves a lot more difficulty in terms of managing your risks especially as EM markets tend to be less liquid and event risks can cause significant snowballs in liquidity. In this sense, EM trading is more difficult and many generally consider EM traders to have a skillset that is more valued vis-a-vis risk management (wheras, say, in G10 FX, managing liquidity risk is not really a issue). Another thing about EM traders is that they read - voraciously. You will typically be trading 5-8 different countries so having an awareness of each country's economic profile and market conditions/dynamics is very important.

Sep 12, 2013 - 6:38am
Silverthunder, what's your opinion? Comment below:

Which asset classes do you prefer to manage? (Originally Posted: 02/10/2010)

What are some of the differences between management of different asset classes? For example, with real estate, as in the case of a REIT, I would think that the market is quite small. There is not that much money invested in REITs compared to, say, equities. Bond Asset Management seems nice in the sense that it is an asset class that I would think is invested in by a large number of institutional investors ie. fortune 500 companies- at least in real short term bonds like Tbills. Equities seem more complex than bonds and real estate.

Let me put this question out there- if you have the choice of asset management jobs over an asset class of your choice which asset class would you choose and why?

Sep 12, 2013 - 6:39am
LAWM, what's your opinion? Comment below:

converts any fi really

Jun 6, 2013 - 1:23am
Munselle, what's your opinion? Comment below:

I know that get rich quick goes against most trading philosophies, but Forex is the best way to do it. It's very simple, at least to me, compared to other forms of trading.

Jun 6, 2013 - 3:53am
MoneyMonkeyWB, what's your opinion? Comment below:

Fair Enough, Munselle but Isn't FX trading Low Risk and Low Return and becomes monotonous if followed for a long period of time, whereas I think ABS trading is a bit more challenging where different securities can be traded whose underlying assets belong to a large variety. Also history says that different categories of assets were covered during different eras to form complex security instruments, so in the future we must hope that new financial instruments will be formed giving rise to various fresh opportunities.

Jun 6, 2013 - 9:28pm
Urban Guerrilla, what's your opinion? Comment below:

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