Trading Multiple Instruments

Mar 23, 2021 09:13 PM ET
Trading Multiple Instruments

A trading instrument is an asset that a trader can buy or sell to make some profits. The financial industry consists of many types of assets, each with different investment strategies, outlooks, costs, volatility, liquidity, etc. The most famous of trading assets include forex, stocks, and futures. They are available to trade through an online brokerage, making it easy to have the one at your disposal. 

Advantages of trading multiple instruments

Having many assets at your disposal has a degree of benefits that one can exploit. Here are some of the advantages:

  • Diversity. You have the chance to introduce variety to your portfolio. It is pretty fun for traders who enjoy trading to scan the fundamentals and technicals throughout the day for different assets.

  • Risk. By spreading your money over different portfolios, it is possible to have the risk spread out.

  • Better option. It is possible to scan and filter the best instrument that gives better returns over others. 

  • Understanding the financial industry. By trading multiple instruments, you get a broad sense of how the market works. 

Disadvantages of trading multiple instruments

There are two major demerits of trading multiple instruments.

  • Psychology. It can be challenging for you to trade so many markets unless you have a perfect mindset. Controlling emotions are complex, especially for novices. 

  • Time consumption. It can demand a lot of time from your side. Sitting on the trading desk for hours can result in fatigue and tiredness.

What are the best instruments for trading?

There are so many choices available to traders that selecting the right ones can be confusing sometimes. Previously stocks were the only famous option amongst investors; however, we have more opportunities each day with the financial sector development. The following instruments can be termed as the best tradable choices:

  • Forex

  • Stocks

  • Crypto

  • Bonds

  • Mutual funds

  • ETFs

Let us dive into the top three and discuss how these instruments are the best addition to your portfolio.

Forex

The currency market is famous for its whopping 6 trillion dollars of trading volume each day. With a wide variety of opportunities and instruments available, you will not find yourself in an extensive search. Include the pairs based on your time zone as forex has a different amount of volatility and liquidity based on the hours. The popular forex pairs are EUR/USD, USD/JPY, GBP/USD, and USD/CHF.

In forex, there is always a good amount of price movements to easily make profits and liquidity to get filled in the orders. The number of strategies, indicators, leverage, automated trading software, brokers, and education in the FX market is uncountable. However, always be aware that the scammers who target beginners and amateurs in their schemes.

Stocks

Trading on Wall Street has gone through various innovations, and now it is possible to add securities to your portfolio from your home's comfort. The share market has stocks ranging between a few pennies up to several thousand dollars. There is always the hustle and bustle on the floors of popular stock exchanges in the US, ensuring good volatility and liquidity.

Some traders love to add stocks alongside forex. It is comfortable to trade both with specific strategies. For example, a trader can choose to day or swing trade currencies and scalp the equities as the market opens. Combining London and New York trading sessions followed by stock exchange opening seems like a perfect combination. Investors can divide their equity equally amongst the two industries or choose to invest more in one, depending on where they succeed.

Crypto

The crypto markets are booming in the era of COVID-19. Recently Bitcoin has seen new highs where speculators value the coin around half a million dollars by the year 2030. The benefits of evading taxes and smoothing out transactions seem fair enough for investors who are rushing to put their assets in cryptocurrencies. Trading profits from the other markets are readily invested into buying this asset for long-term investments.

Nowadays, brokers can provide cryptos, stocks, and currencies on a single live account. With all the instruments under one banner, you do not have to consider opening a portfolio, go through KYC procedures, and understand various requirements set by multiple platforms. 

Bonds, ETFs, and mutual funds

These three assets are the best choices amongst investors who like to keep their risk on the downside and prefer long-term investments. Initially, it may seem challenging to scan the best possible bonds, ETFs, and mutual funds, but once done, your only job will be to manage positions a few times a month and extract profits whenever possible.

You can also choose swing trading strategies in stocks and forex to complement these three. Consider expense ratios, tax efficiency, and subcategories of each for selecting the option with better outcomes. Trade them with a single system so that everything is easily manageable. 

End of line

Some traders get so involved in the trading industry that they include whatever assets they can get their hands on inside their account. Trading multiple instruments do come with many benefits for traders, but it is essential to keep in mind that overtrading can lead to detrimental effects. After analyzing the assets, find the best paper trade them all together for a particular duration to understand if it is possible to handle them simultaneously.


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