The Instruments

Every financial market is made of buyers and sellers agreeing on prices. The difference from one market to the next is what’s being bought and sold. In a farmer’s market, it’s fruits and vegetables. In a financial market, the things being traded are called instruments. Different types of instruments are traded in different markets, and this lesson covers four common types: stocks, futures, forex, and crypto.

Stocks

A stock represents ownership in a company. That ownership is divided into small pieces called shares. Buy one share of Apple and you own a tiny part of the business. The stock market is where people buy and sell these shares.

The company doesn’t set the price of its shares. Like every market, the price comes from buyers and sellers agreeing on what each share is worth.

Futures

A futures contract is an agreement to buy or sell something at a set price on a future date. Imagine a farmer agreeing today to sell next season’s wheat to a bakery for a certain price. They use a futures contract to lock in that price. The futures market is where people buy and sell these contracts.

The exchange sets the contract’s terms, but it doesn’t set its price. Like every market, the price comes from buyers and sellers agreeing on what the contract is worth.

Forex

A currency pair compares the value of one currency with another. The euro and the dollar, for example, form a pair because the price tells you how many dollars one euro is worth. Trading the pair means exchanging one currency for the other. The forex market is where people trade these currency pairs.

No government sets the price of a currency pair. Like every market, the price comes from buyers and sellers agreeing on what one currency is worth in terms of the other.

Crypto

A cryptocurrency is a kind of digital money whose ownership and transfers are recorded by a computer network. Bitcoin is the best-known example. People can buy it, sell it, or send it to someone else without any physical money changing hands. The crypto market is where people trade cryptocurrencies.

No company or government sets the price of a cryptocurrency. Like every market, the price comes from buyers and sellers agreeing on what the cryptocurrency is worth.

The Market You’ll Trade

This course teaches its trading model through the futures market. Every chart, example, and practice assignment ahead will use futures, so you won’t need to choose a market of your own.

The model studies how price moves, and prices come from buyers and sellers in every market covered in this lesson. The same ideas can be applied to stocks, forex, and crypto, but futures will be the focus throughout this course.

Homework

Your homework is to identify instruments using only the information on their Yahoo Finance pages. You won’t be told what each one is before you open it.

1. Open each instrument in Batch 1 below.
2. Use two clues to identify each instrument: the full name at the top of the page and the smaller line beneath it.
   • A company’s name indicates a stock. The smaller line will name the stock exchange where its shares trade.
   • A name containing a month and year indicates a futures contract. The month and year show the future date connected to the contract.
   • Two three-letter currency codes separated by a slash, such as GBP/USD, indicate a currency pair. GBP stands for the British pound, USD stands for the US dollar, and every currency has its own code.
   • A coin’s name followed by a currency, such as Ethereum USD, indicates a cryptocurrency priced in that currency.
3. For each instrument, write down:
   • Its full name
   • Which of the four instrument types it belongs to
   • In your own words, what is actually being bought and sold
4. Write one or two sentences explaining what all five pages have in common, even though the instruments are different.
5. In your journal, open The Markets and create a folder for this lesson named The Instruments. Save your work inside it.

The instruments are divided into three batches. Batch 1 is required for this homework, and each additional batch is tied to another star in the mastery targets.

Validation checklist

Before an identification counts, make sure:

• The full name and instrument type are both recorded.
• The type is supported by information shown on the Yahoo Finance page.
• The entry explains in your own words what is being bought and sold.
• The completed work is saved in this lesson’s folder in your journal.

Mastery targets

One identification means looking up one instrument, recording its full name and type, and explaining in your own words what is being bought and sold.

Only identifications that pass the validation checklist count toward a star.