Picking an Instrument to Trade

When starting out in spread betting or CFD trading many people are often unsure of what instrument to trade as online there are numerous instruments to chose from. This can also be a problem for more advanced traders who get dragged into trading instruments which aren’t suitable for them personally or are not the best option available to trade. In this post we are going to list some of the things that are important when considering what instrument you should pick.  

  • Do you have particular experience or knowledge with this instrument. For example if you had been a successful Forex analyst it would probably make sense to look at Forex being the main instrument that you would trade. Having knowledge and experience will soften your learning curve and give you more insight into the instrument. 
  • The Spreads offered on the instrument must be small. It will be harder to turn a profit if the spreads are larger as it will require a bigger swing in your favor for you to make a profit. 
  • The instrument must be available with the company you trade with or with the company you wish to trade. A obvious but important consideration, as different companies often different ranges of instruments to trade.
  • The instrument must have an availability of real time data about the instrument without to much of an additional cost to the trader. Real time data packages for different instruments come at various different costs. 
  • The chosen instrument must be highly liquid. A high volume of trading is often necessary to move the value of an instrument. 
  • The instrument must have a degree of volatility. This necessary in order to be able to beat the spread, if there is no volatility in a market it will mean that you won’t be able to beat the spread. 

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