Why should a trader choose to trade with instruments specification?
When traders decide to trade using instrument specifications, they usually refer to the detailed information related to specific financial instruments, which might include stocks, commodities, currencies, or indices. These specifications offer crucial insights into the trading conditions and attributes of each financial asset. There are several compelling reasons why traders should diligently take these specifications into account:
Clear Understanding
Instrument specifications serve as a valuable resource for traders, assisting in developing a thorough understanding of the asset in question. They provide essential details about the fundamental characteristics of the underlying asset, encompassing its name, ticker symbol, and the exchange where it is listed and traded.
Trading Hours
Instrument specifications provide valuable information about the trading hours specific to the asset, clearly outlining the precise intervals when the market is open for trading. This aspect becomes especially relevant for assets traded across various time zones.
Contract Size
Within the realm of derivatives and CFDs, the contract size signifies the theoretical worth of an individual contract. This particular aspect holds notable significance, as it plays a pivotal role in determining the position size and assessing the potential risk exposure linked to the trade.
Tick Size and Tick Value
The tick size denotes the smallest allowable price change for an asset, while the tick value measures the financial value of a single tick movement. Traders employ this information to accurately calculate potential profits and losses.
Leverage and Margin Requirements
Regarding leveraged products like CFDs, the instrument specifications outline the offered leverage ratio and the corresponding margin requirements. Understanding the concepts of leverage and margin is crucial for effectively managing risk.
Spread and Fees
The spread refers to the difference between the buying (bid) and selling (ask) prices of an asset. Within the instrument specifications, the spread, along with any additional charges or commissions associated with trading that asset, will be thoroughly detailed.
Expiration Dates (For Futures and Options)
For traders involved in futures or options contracts, a vital aspect to take into account is the expiration date of the contract. This information is provided within the instrument specifications, and traders must carefully manage their positions to coincide with this date.