Instrument Definition – What is Instrument? | CFI JO
Trading involves a high risk to the invested capital. Understand all risks before investing 

instrument

Financial instruments are anything that can be used for trading, mainly for speculation or hedging purposes. These include, but are far from limited to Stocks, Forex, Commodities, Indices, ETFs.

 

The reason for the existence of such a vast range of financial instruments is that traders and brokers wish to have a variety of trading options at their disposal, with each one serving a unique purpose that can be utilized to render different outcomes.

 

Types of instruments

 

Financial instruments are largely categorized under one of two types: cash instruments and derivative instruments.

 

Cash instruments

 

Cash instruments refer to securities that are easily transferable and where the holder will often take possession of the underlying asset. For example, bonds, stocks, and shares are cash instruments.

Cash instruments can also be subcategorized into equity-based and debt-based instruments. They can also be divided into either long-term or short-term.

 

Derivative instruments

 

Derivative instruments are linked to a variety of products but what is truly traded is their underlying value and the holder will not take physical possession of the asset.

 

Forex

 

As financial instruments, Forex cannot easily be classified under the above categories. This is because depending on how you trade forex, it could fit into either.

 

Spot forex trading does involve an actual transfer of the asset and would therefore make it a cash instrument. However, it is most commonly traded through CFDs, Options, and Futures which only trade on the value of the asset derived from the spot market. Subsequently, trading Forex through any of these instruments would be classified as derivatives.

 

Key takeaways:

 

  • There are a wide range of instruments available to be traded, each with their specific utilities and considerations
  • Most instruments fit into two main categories: cash instruments and derivative instruments
  • Forex could be either a cash or derivative instrument, depending on how it is traded
CFI Financial Group is an award winning global financial markets provider with over 23 years of experience and regulated entities in several jurisdictions, focused on offering impeccable execution and trading conditions including very low spreads, professional services, dedicated support and powerful tools.
CFI Financial Group is globally regulated with subsidiaries in
London • Larnaca • Beirut • Amman • Dubai • Port Louis
Credit Financial Invest for
Financial Brokerage Ltd
Al Rabieh Towers, Al Rabieh
17545

Important Disclaimer:


We would like to remind that while we endeavour to provide best possible services, CFI provides execution only services and any information, reports, opinions, commentary or other material he received directly from CFI or from its employees or through any provided analytical tools or third party research provided to the client from the Company shall not be deemed as investment advice and it cannot be relied upon to make investment decisions. The Client commits to make his own research and from external sources as well to make any investment. The Client agrees that CFI will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The contents of any report provided should not be construed as an express or implied promise, as a guarantee or implication that clients will profit from the strategies herein, or as a guarantee that losses in connection therewith can, or will be limited.


Forex and CFDs are leveraged products that incur a high level of risk and a small adverse market movement may expose the client to lose the entire invested capital. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The possibility exists that you could sustain a loss in excess of your deposited funds even if a stop loss is used and therefore, you should not speculate with capital that you cannot afford to lose and be aware of trading risks. Credit Financial Invest for Financial Brokerage Ltd provides general information that does not take into account your objectives, financial situation or needs. The content of this website must not be interpreted as personal advice. Please ensure that you understand the risks involved and seek independent advice if necessary.

CFI Jordan is regulated by the Jordan Securities Commission

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