Trading instruments are the financial assets or contracts that traders buy and sell in the markets. They form the foundation of trading activity and decide where opportunities arise. Each instrument comes with different levels of volatility, liquidity, and risk, which makes it important for traders to select carefully. The choice of instrument also guides which strategies and analysis methods can be applied effectively.
Importance / Key Highlights
- Defines the asset class and market exposure a trader will operate in.
- Shapes the level of volatility, risk, and capital requirement.
- Influences the type of analysis, strategy, and execution method.
- Provides diversification options across multiple financial markets.
Main Trading Instruments
- Equity (Stocks): Company shares for growth and dividends.
- Derivatives (Futures & Options): Contracts for speculation or hedging.
- Commodities: Gold, crude oil, and agricultural products.
- Forex: Global currency pairs with high liquidity.
- Crypto: Digital currencies, highly volatile and 24/7.