Why should a trader choose to trade with instruments specification?
When a trader decides to engage with instrument specifications, they are essentially delving into comprehensive information pertaining to distinct financial instruments, encompassing stocks, commodities, currencies, or indices. These instrument specifications furnish crucial insights into the trading conditions and attributes of each financial asset. Several compelling reasons underlie why traders should meticulously heed these specifications:
Clear Understanding
Instrument specifications facilitate traders in acquiring a lucid comprehension of the asset they are trading. This entails furnishing indispensable particulars about the underlying asset, encompassing its designation, ticker symbol, and the exchange where it is traded.
Trading Hours
Instrument specifications furnish insights regarding the trading hours of the asset, delineating the exact intervals during which the market remains accessible for trading. This holds particular significance for assets traded across distinct time zones.
Contract Size
In the realm of derivatives and CFDs, the contract size delineates the hypothetical value of a single contract. This piece of information proves pivotal in calculating the position size and gauging the potential risk exposure associated with the trade.
Tick Size and Tick Value
The tick size signifies the minimal price alteration by which the asset’s price can shift. Meanwhile, the tick value denotes the financial value equivalent to a single tick. Traders rely on this information to precisely compute profits and losses.
Leverage and Margin Requirements
In the context of leveraged products such as CFDs, the instrument specifications encompass details concerning the provided leverage and the accompanying margin prerequisites. Grasping the concepts of leverage and margin is pivotal for adeptly managing risk.
Spread and Fees
The spread denotes the variance between the buying (bid) and selling (ask) prices of an asset. The instrument specifications will provide an account of the spread as well as any supplementary fees or commissions affiliated with trading that particular asset.
Expiration Dates (For Futures and Options)
When engaging in trading futures or options contracts, traders must be cognizant of the contract’s expiration date. The instrument specifications will furnish this vital information, necessitating traders to proficiently manage their positions in accordance with it.