Essential

Financial Instruments

Tradeable assets including currencies, stocks, bonds, commodities, options, and derivatives.

Definition

Financial instruments are tradeable contracts representing monetary value. They include cash instruments like stocks, bonds, and currencies, as well as derivative instruments like options, futures, and CFDs. Each instrument has its own characteristics, risks, margin requirements, and trading hours. Choosing the right instrument for your strategy is fundamental to trading success.

How It Works

Cash instruments (stocks, forex, bonds) derive value from supply/demand or the issuing entity
Derivative instruments (options, futures, CFDs) derive value from an underlying asset
Each instrument trades on specific exchanges or OTC markets with their own hours and rules
Brokers offer different instrument selections with varying spreads, swaps, and margin requirements

Trading Tips

Start with one or two instruments and learn their behaviour before branching out

Check spread, swap rate, and margin requirement for each instrument at your broker

Match the instrument to your strategy. Scalpers need tight spreads; swing traders may prefer trending commodities.

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