Why should a trader choose to trade with instruments specification?
When a trader chooses to trade with instruments specifications, they are typically referring to the detailed information about specific financial instruments, such as stocks, commodities, currencies, or indices. These instrument specifications provide vital details about the trading conditions and characteristics of each financial asset, and there are several reasons why traders should pay close attention to these specifications:
Instrument specifications help traders gain a clear understanding of the asset they are trading. It provides essential details about the underlying asset, such as the name, ticker symbol, and the exchange where it is traded.
Instrument specifications provide information about the trading hours of the asset, including the specific times during which the market is open for trading. This is especially important for assets traded in different time zones.
Tick Size and Tick Value
The tick size refers to the minimum price increment by which the asset’s price can change. The tick value specifies the monetary value of one tick. Traders use this information to calculate profits and losses accurately.
Leverage and Margin Requirements
For leveraged products like CFDs, the instrument specifications will outline the leverage offered and the corresponding margin
requirements. Understanding leverage and margin is vital for managing risk effectively.
Spread and Fees
The spread is the difference between the buying (bid) and selling (ask) prices of an asset. The instrument specifications will detail the spread and any additional fees or commissions associated with trading that asset.
Expiration Dates (For Futures and Options)
If trading futures or options contracts, traders need to be aware of the expiration date of the contract. The instrument specifications will provide this information, and traders must manage their positions accordingly.