Different Types of Investing Instruments

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An ideal instrument to trade for most investors is one that is volatile enough to allow for profits (without excessive risk), as well as one that has sufficient liquidity. That being said, there is an assortment of options available at a trader’s disposal when considering an instrument that matches the investor’s trading style.

Commodities correspond to certain goods within industries, such as metal, meat, and agricultural products. These commodities are exchanged through futures contracts that standardize the quality and quantity of the commodity in question. Today, the most frequently traded commodities include rare metals, sugar, corn, coffee, and wheat.

An e-mini is short for an electronically traded futures contract. Such an e-mini is akin to a standard futures contract, but only represents a fraction of this contract. That being said, e-minis denote an agreement to buy or sell the value of the underlying index at a future date.

Exchange Traded Funds (ETFs) are investment funds that track the index of a sector or a basket of commodities. ETFs trade just like stocks, and are known for their relatively low risk.

FOREX is the foreign exchange market for currencies. These markets are the largest and the most active markets in the world, with a daily volume of almost four trillion dollars. The major pairs traded on FOREX include Euro/USD, USD/YEN, USD/Swiss Franc, and Pound/USD.

Stocks are another instrument available that represent partial ownership in a company. Today, there are almost 3600 publically available stocks that a trader can invest in.

Finally, treasuries are US government debt obligations that can be traded and exist in increments of 2-year, 5-year, 10-year and 30-year bonds and notes.

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