Financial trading simply is the purchasing and selling of various financial instruments to make profits from them. The various financial trading instruments are usually in the form of stocks, forex, futures, or derivative, like derivatives for put (CFD), call (OTC), futures, and spot (Futures), to name a few. This is also known as the Forex market. The nice thing about financial trading is you can easily do it either on your own free time or you may choose to do it full time, after earning profit there is no concern on whether you will lose or gain money.
Financial trading instruments also include stock indices, which are financial products that track the movement of a particular security or equity index such as the Dow Jones Industrial Average (DJIA). The DJIA tracks and measures the movement of world-wide major stock indexes such as the Nasdaq, the New York Stock Exchange (NYSE), the London Stock Exchange (LSE), the American Stock Exchange (AMEX) and the Tokyo Stock Exchange (TSE). These indices are widely used by corporate and investment managers to analyze the movement of their stocks, thus trading instruments of this nature are commonly known as equity indices.
Financial trading instruments are usually traded over the counter (OTC). This means that the trade is done in OTC butterfly blades. OTC means Over The Counter. There are also a number of futures and options markets where trades are made over the phone.
Financial trading instruments can trade in several different types. The most common financial trading instruments traders use are interest rate trading instruments. These include the depository receipts (DDRs), swap agreements, forward contracts, and swap deals. It is very common for financial institutions to make money on commodity futures. Commodity futures contracts for delivery of specific goods at a specific price in the future.
Other types of futures contracts are natural gas, electricity, crude oil, credit default swaps, interest rate Swaps, equity derivatives, exchange-traded funds (ETFs) and foreign exchange (forex) futures. Futures and options trading instruments are highly leveraged and speculative. They involve high risks of loss. Because of this, they are very volatile and subject to sudden changes in market prices.
Commodity futures and options are financial instruments that trade based on the prices of particular commodities. Commodity Futures includes agricultural produce such as corn; wheat, barley and dairy; metals including gold, silver and copper; and basic food products including electricity, gasoline and food products. Commodity options trade specific types of futures contracts. Examples of commodity options are gold futures, cotton futures and crude oil futures.
A financial instrument is a legal agreement or contract involving a person, a company, a country or an agency and a particular financial instrument, called a security. Security instruments can take many forms but the most common types are financial securities, interest rates and bond prices. Financial securities refer to anything that an investor could buy to secure payments of his obligations such as bank savings accounts, government bonds, stock certificates, company stock, and mortgage-backed securities. A financial instrument may also refer to a debt instrument, which is a promise to pay money to the lender on a future date for a stated price. For example, the sale of stocks is a financial instrument, while bonds are an obligation of a borrower to the lender.
Trading instruments are trading approaches used by speculators to create and sell shares of ownership in a corporation, partnership, mutual fund or any other type of financial instrument. An example of a trading strategy is a call option. This is a strategy that allows a trader to purchase an underlying asset at a certain price and sell it to him at a different price within the same day. This is not a fundamental investment strategy because the value of an asset does not change without the intervention of the trader. Therefore, trading instruments, including derivative instruments, are designed for day-to-day fluctuations in price levels.