× Risk Warning: Buying or selling financial instruments may result in the loss of part or all of your invested funds.

Trading Instruments

Trading instruments are tradable packages of capital each of which is unique by its structure and characteristic features. Wide range of trading instruments in today's marketplace allows traders to efficiently invest their capital. Among such diversity traders try to find an instrument that matches their style and this surely requires a deep research.

Most Popular Trading Instruments

The instruments that tend to be popular among investors and traders are:

Commodities

Commodities are viable investment vehicles that help to trade efficiently. They are bought and sold through futures and can be of three classes: energy, metals, and agricultural products. The most widely traded commodities are precious metals, like gold, silver and platinum, agricultural products, like coffee, wheat, sugar, corn and cotton, and crude oil with its derivatives, like gasoline and heating oil.

They have a universal price around the world and since they don’t depend on any company or nation they help to make steady investments.

Stocks

Stock investment signifies an ownership in a company. Investing in stocks is highly preferred and widely accepted by traders. This is because by means of it the exchange of securities between buyers and sellers is facilitated and the risks are reduced. In spite of the fact that stocks’ actual trading volume changes day by day, there are certain stocks, including Sirius XM Radio (Nasdaq: SIRI), Ford (NYSE:F), Bank of America (NYSE:BAC), Standard Pacific(NYSE:SPF), Intel (Nasdaq:INTC) and Zynga (Nasdaq: ZNGA) that tend to be at the top of the list.

Currencies

Currencies are essential components of trade whose values are determined by comparing one with the other. Hence, taken separately they cannot be weak or strong; the strength becomes obvious while comparing one currency to another. Each currency pair consists of a base currency (the first currency in the pair) and a quote currency (the second currency in the pair). For example, in the currency pair EUR/USD Euro is the base currency, and U.S. dollar is the quote currency. They are traded in pairs indicating how much of the quote currency is needed for buying one unit of the base currency.

According to popularity, the most popular currency is U.S. dollar, then come Euro, British Pound, and Japanese Yen. Those in their turn are followed by the Swiss Franc, Australian Dollar, Canadian Dollar, and New Zealand Dollar.

Indices

An index is a statistical indicator which represents the total value of the stocks constituting it. Index trading allows traders to capitalize on the entire country’s stock market movement. A change in the value of an index indicates a certain proportional change in the stocks involved in the index. People prefer trading indices since the latter provide them with exposure to a wider collection of stocks.

There are different types of indices that can be price-weighted or capitalization-weighted. The Dow Jones Industrial Average (DJIA) is an example of price-based index, because separate stock prices form an essential part in its calculation. Conversely, S&P 500 is capitalization-weighted resulting in the increased role of the company size.

PCI (Personal Composite Instruments)

Though the concept of PCI is simple and has much in common with currency trading, it offers wider opportunities and can be used to create investment portfolios and quote one portfolio in the units of value of another. Traders can easily trade with instruments belonging to different categories, for example, Gold against U.S. dollar (XAU/USD) which is not provided in traditional trading.

Most traders choose instruments giving importance to their liquidity and the frequency of price movement. However, being constrained to only these two factors is not enough for a complete trade. One should have various data at his hand before deciding what instrument to rely on.