Why should a trader choose to trade with instruments specification?
When traders opt to engage with instrument specifications, they are essentially delving into comprehensive particulars concerning distinct financial instruments, encompassing stocks, commodities, currencies, or indices. These specifications furnish crucial insights into the trading circumstances and inherent attributes of each financial asset. Numerous rationales underscore the significance of scrutinizing these specifications for traders:
Clear Understanding
Instrument specifications offer traders a lucid comprehension of the asset in question. They furnish indispensable particulars about the foundational asset, including its nomenclature, ticker symbol, and the exchange facilitating its trading.
Trading Hours
Instrument specifications convey insights concerning the trading hours of the asset, delineating precise durations when the market is accessible for trading. This aspect gains paramount significance for assets subjected to diverse time zones.
Contract Size
In the context of derivatives and CFDs, the contract size delineates the hypothetical value of a single contract. This detail is pivotal in ascertaining the magnitude of the position and appraising the potential risk exposure inherent in the trade.
Tick Size and Tick Value
The tick size denotes the minimal price alteration through which the asset’s price can shift. On the other hand, the tick value specifies the financial worth of a solitary tick movement. Traders leverage these particulars to precisely compute gains and losses.
Leverage and Margin Requirements
In the case of leveraged products such as CFDs, the instrument specifications will elucidate the extent of leverage extended and the correlated margin prerequisites. A comprehensive grasp of leverage and margin holds pivotal significance in proficiently handling risk.
Spread and Fees
The spread denotes the variance between the purchasing (bid) and selling (ask) prices of an asset. The instrument specifications expound upon the spread, in addition to any supplementary charges or commissions affiliated with the trading of said asset.
Expiration Dates (For Futures and Options)
In scenarios involving trading futures or options contracts, traders must remain cognizant of the contract’s expiration date. The instrument specifications encompass this data, necessitating traders to judiciously oversee their positions in alignment with the contract’s timeline.