Traders use trading instruments in forex and equities markets. In the Forex market, the trading instruments are foreign currencies, stocks, options, futures, swaps, hedges and commodity and bond indexes.
In the stock market, a trading instrument is any agreement to purchase or sell a particular asset, usually a stock, for a pre-determined price on a date and in an amount that has not been settled by the end of the period for which the agreement was made. The value of any trading instrument at the time of maturity is dependent upon the volume and type of inventory for which it is used and the supply and availability of that asset. This is why the value of trading instruments is always dependent on the supply and demand of the underlying asset.
In the stock market, you can make money if you buy low and sell high, or vice versa. It is very important to remember, however, that if you lose all your money in the stock market you will still owe it to someone else. Trading in the stock market involves a lot of risk and the only way to minimize your losses is by trade wisely. To do this, one must know the market better.
Futures contracts are agreements that a seller makes with a buyer to deliver a certain commodity on a specific date. In the case of futures trading, the buyer is known as the seller. For example, if a trader buys a commodity futures contract at $40 per barrel of oil and then sells it at $100 per barrel, the trader is selling his or her interest in the commodity for a fixed price. The value of the commodity at the time of maturity is based on the supply and demand of the underlying asset.
There are several ways to execute a futures contract, depending on the type of transaction. One way to do it is by purchasing a call option to the commodity at the point at which you would like to sell, at a price at least equal to or greater than the strike price; this option is called the strike price. or you can buy a put option to the commodity at a price at least equal to or greater than the strike price at a later time; this option is called the strike price plus an amount, and a premium.
The most common type of option is called a put option. If the price per barrel is expected to rise, traders can put their options at a price of the higher of the current price and wait for the strike price to increase before selling. while if the price is expected to decline, they can set their options at a lower of the current price and wait for the strike price to drop before selling. If you place a put option, you should consider the effect of oil prices on the price of the option and if you have an active market for futures in oil.
In Forex trading, the trading instruments you use are more likely to be futures trading instruments. A futures trading contract is usually made up of either an index into an equity index, a currency pair or an index and stock of another asset, such as stocks, and is called an index futures contract.
Forex trading is an excellent source of investment for beginners because there is always money to be made with the exception of periods of economic recessions. There is also large profits to be made on the day of the futures market when a particular commodity is expected to rise in price.