IC Markets Only Offers FX & CFD Products
A common IC Markets criticism is that they only offer the following trading instruments:
They are fantastic for the above but only if you're looking for these tools specifically.
Only FX/CFDs Supported
Even though it is considered a large Forex/CFDs broker, IC Markets isn’t without its faults. One of the main problems with IC Markets is the fact that there are only CFDs products available for trading through its brokerage interface. While this is alright for traders who only want to trade using CFDs as instruments, it actively prevents and discourages diversification, making IC Markets a poor choice for many traders when compared to other platforms such as IG or Pepperstone.
What Other Investment Instruments Are There?
Before looking at why having only CFDs products available is such a weakness, it’s important to understand what other instruments IC Markets could be offering to broaden its appeal. The most basic investment instruments, of course, are shares of stock. Though the traditional stock market lacks the high-risk, high-reward dynamic of the Forex and CFDs market, it has been shown time and again to be an excellent option for building long-term wealth. Historically, adjusting for fluctuations caused by the normal business cycle, the stock market gains an average of about 7 percent each year. Of course, short-term stock trading can also be used to generate income by anticipating upcoming stock movements and trading in accordance with those predictions.
Next in the chain of investment instruments are commodities such as oil, gold, silver, platinum, palladium and various agricultural outputs. Commodities provide crucial balance to currency markets, as they have historically been considered a safer, less volatile place to invest money when currencies become too unpredictable. Gold, in particular, has often been a stable haven for investors when stock and commodity markets are experiencing downturns.
Indices are another class of assets that IC Markets lacks the ability to trade. Indices are effectively large groups of stocks that are traded collectively. A prime example of a stock index is the well-known Dow Jones Industrial Index. When investors trade on indices, they are effectively investing based on the collective performance of the stocks contained within an index, rather than on any one individual stock.
Futures contracts, though a bit more advanced than standard shares and commodities, can also play a part in a well-rounded trading portfolio. In futures trading, investors attempt to predict the future price point of an asset by establishing a buy/sell contract that will mature on a specific date. Often, futures are used to hedge the risk of current investment positions.
Finally, the fact that IC markets has only CFDs products available excludes one of the newest classes of investment assets: cryptocurrencies. These currencies, which include Bitcoin, Litecoin and Dash, are created by computational chains, rather than minted by an issuing government. Though highly speculative, they have proven to be very profitable for investors willing to take on an innovative investment asset.
Why This Lack of Diversity Matters
The reason that the lack of asset diversity on the part of IC Markets presents such a problem is the fact that it prevents traders from moving between instruments to suit their needs and the current conditions of the market. Though Forex and CFDs can be great ways to profit from trading, the currency market, like any other, has its ups and downs. Generally, when global economic recessions take place, as in 2008, the volatility of the Forex market increases. As this volatility becomes more pronounced, it presents too much risk for some traders to want to remain active in Forex. Since even asset-based CFDs don’t actually hold any equity in the underlying asset, they are equally ill-suited for periods of economic volatility.
During such times, it’s important that traders be able to move their investment funds into other instruments that are less risky, but which still have the ability to turn a profit. Traders who use brokerages with fewer options don’t have the luxury of this kind of instrument mobility, meaning that periods of higher volatility are less likely to be profitable for them.
While our IC Markets review found that they are certainly a large force in the world of Forex and CFDs trading, its model of having only CFDs products available puts its traders at a marked disadvantage in more volatile currency market conditions. A CFD-only environment also makes it impossible for investors who prefer a truly diversified portfolio to function. Overall, traders who prefer a wider range of choices are better off working with Pepperstone or IG, both of which offer a much more diverse set of instruments.