Equity markets offer salvation as FX volatility dies out Equity markets offer salvation as FX volatility dies out Equity markets offer salvation as FX volatility dies out

Equity markets offer salvation as FX volatility dies out

Thought Starters 5 minutes to read

Saxo Group

Summary:  With FX markets falling flat and trading opportunities drying up, find out how equity index CFDs could help get your portfolio back on track.

Hope dying out for FX volatility
Volatility in FX markets has fallen sharply in recent years. The sustained lack of volatility is as discouraging for FX traders as the fact that current and expected volatility are also at record lows in major currencies. The very low policy rates and fairly sluggish growth everywhere means a lack of the policy divergence that is a traditional driver of FX volatility. Another contributing factor is China’s steady management of its exchange rate versus the US dollar since the gyrations of 2015-16. There is no strong indication that the situation will improve in the near term – though volatility could post a comeback on any destabilising move in equity and other markets if the US and China détente on trade yields to a fresh round of tension. Or perhaps if the market increasingly fears that Trump will not be re-elected in the US presidential election in early November.  

Historically low volatility is making life difficult for FX traders. EURUSD, the most traded currency pair, has recently posted record lows for medium and longer-term implied volatility – a measure of how much EURUSD options traders gauge the exchange rate will move in coming months. At an implied volatility for the one-month time frame below 4%, the level is at around half of the 200-week moving average that prevailed during almost all of 2015-2018 and well below its current 200-week moving average of 6.9% at the time of writing. This sheds light on why many have abandoned hope in larger trading opportunities.
Source: Bloomberg and Saxo Group
Equities leave FX feeling flat
While the FX market is largely flat, equities are showing steady volatility development. For example, the S&P 500 was about three times more volatile than EURUSD in 2019, indicating that the equity index space can offer significantly more trading opportunities than FX.
Source: Bloomberg and Saxo Group
Not only are equity markets offering high volatility, but also strong performance. Driven by low interest rates and stimulus by the Federal Reserve, the S&P 500 surged by 29% in 2019, its best performance since 2013.
Source: Saxo Group

Historical figures. Past performance is not a reliable indicator of future results.

Equities offer logical step for FX traders 
With equities displaying higher volatility and strong performance in recent years, you could conclude that they offer a more attractive trading environment than FX. And while switching from pure FX trading to incorporate equities may seem like a sea change, it’s actually not as cumbersome as you might think. 

In fact, an easy transition for any FX trader would be to start trading equity index CFDs.

What are equity index CFDs?
An equity index CFD is a derivative product that enables you to speculate on the performance of an entire stock market index, rather than buying individual shares. For example, with just one CFD trade, you can gain exposure to the performance of the whole S&P 500, or any other index of your choice.

When you trade an index CFD, you’re essentially agreeing to exchange the difference in price of an index from one time period to another. And as a CFD is a derivative, you can go both long and short – enabling you to profit from an index both rising and falling in value. 

Learn more

Similarities between FX trading and index CFDs
Transitioning from FX to index CFDs with Saxo should be relatively straightforward, as the two products share many similarities. For example:

  • Both are traded on leverage
  • You’re able to go long and short
  • The trading conditions are similar: low initial margins, over-the-counter execution, all-inclusive spreads and no expiration dates. 
  • You can trade FX and CFDs via the same Saxo platform, using the same trading tools and charting analysis. 

Beyond that, if you rely on technical analysis to trade FX, you should find it easy to trade index CFDs as well. This is because you’ll be looking for similar chart patterns and be able to apply the same technical principles to find trade opportunities. More fundamental-focused traders will be pleased to hear that macroeconomic factors, such as interest rate moves, affect both products, which should help make the switch between the two relatively seamless. 

Furthermore, you needn’t worry about liquidity should you move away from FX. Saxo derives all its index-tracking CFDs from the volume in the futures market, meaning they’re also highly liquid products. The table below provides a more detailed comparison of the two instruments when trading them with Saxo.

Source: Saxo Group
Source: Saxo Group
The value of equity index CFDs can go down as well as up. Losses can exceed deposits on margin products. Like with other complex products, including CFDs and FX, equity index CFDs come with a high risk of losing money rapidly due to leverage.

Start trading index CFDs today 
If you’re tired of low volatility restricting your opportunities in FX markets, consider trading index CFDs with Saxo. We offer 29 different index-tracking CFDs with tight, all-inclusive spreads and leverage up to 20x. 

Try out trading US 500 CFDs now.



The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.