Popular tools of the stock market that a trader should know

The stock market provides a wide range of opportunities for earning and investing, but effective trading requires a deep understanding of popular tools that provide analysis, risk management, and strategic planning. Modern technologies provide access to diverse assets, analytical services, and software, making the trading process more structured and predictable.

## Classification of Popular Stock Market Instruments

The variety of financial instruments allows traders to choose strategies that match the level of risk and expected returns. Each category plays a key role in shaping an investment portfolio and making trading decisions.

### Stocks: Fundamental Asset

Securities confirming ownership share in a company. Traders use this instrument for speculation, long-term investments, and receiving dividend income.

**Parameters:**

1. Liquidity: the most successful options are traded on major exchanges such as NYSE, NASDAQ, LSE. Example – Apple stocks (AAPL) with daily turnovers in millions of dollars.

2. Volatility: high-dispersion assets (Tesla, Nvidia) allow earning on short-term price movements, while stocks of companies like Procter & Gamble or Johnson & Johnson are suitable for conservative strategies.

3. Dividends: stable brands (Coca-Cola, McDonald’s) pay regular profits.

### Bonds: Capital Protection and Stable Income

Debt securities issued by governments and corporations. They provide fixed interest income and are used for portfolio diversification.

**Types:**

1. Government bonds (Treasuries, OFZ): provide minimal risks and guaranteed income. The yield of 10-year US bonds fluctuates in the range of 3-4% annually.

2. Corporate bonds: issued by large companies (Amazon, Microsoft), offer increased yield but come with credit risks.

3. Municipal bonds: provide tax benefits and are used to finance infrastructure projects.

### ETF (Exchange-Traded Funds): Ready Solutions

Baskets of assets combined into a single instrument. The format reduces potential losses and simplifies diversification.

**Popular ETFs:**

1. **SPDR S&P 500 ETF (SPY):** tracks the S&P 500 index, includes major US companies.

2. **Invesco QQQ (QQQ):** focused on the technology sector, includes Apple, Microsoft, Nvidia stocks.

3. **Vanguard Total Stock Market ETF (VTI):** covers the entire US market, suitable for long-term investments.

### Derivative Financial Instruments: Popular High-Yield Strategies

Options, futures, and CFDs that allow earning on price changes of underlying assets without owning them directly.

**Characteristics:**

1. **Futures:** contracts for buying or selling an asset in the future at a fixed price. Used for hedging and speculative trading.

2. **Options:** provide the right (but not the obligation) to buy or sell an asset at a predetermined price. Used for risk management and earning on volatility.

3. **CFDs (Contracts for Difference):** allow traders to speculate on price changes without buying the securities themselves, providing trading with leverage.

## Popular Analytical and Trading Platforms

Effective trading on the stock market is impossible without popular analysis tools and trading terminals.

**Trading Platforms:**

1. **MetaTrader 5 (MT5):** a popular platform for trading stocks, currencies, futures. Supports automated systems.

2. **Thinkorswim (TD Ameritrade):** an advanced platform for market analysis, access to options and futures contracts.

3. **Interactive Brokers (IBKR):** provides access to global markets, suitable for professional traders.

**Analytical Services and Stock Screeners:**

1. **TradingView:** a tool for technical analysis with the ability to use custom indicators and algorithms.

2. **Finviz:** a service for scanning securities based on various parameters (liquidity, volatility, market capitalization).

3. **Bloomberg Terminal:** a professional analytical service with access to financial news.

## How to Use Popular Stock Market Instruments to Build a Strategy

Traders and investors combine various instruments to achieve their goals. Conservative methods are based on bonds and ETFs, while short-term trading requires a deep understanding of securities, derivative resources, and algorithmic solutions.

### Long-Term Investing: Capital Protection and Stable Growth

Building a portfolio focused on long-term investments reduces risks and allows for stable income over several years. The approach is based on index funds, bonds, and dividend stocks, providing a balanced mix of profit and security.

**Portfolio Example:**

1. **S&P 500 ETF (SPY, VOO, IVV):** includes major US companies, demonstrating an average annual return of 8-10%.

2. **Bonds (US Treasuries, corporate bonds):** protect capital from market shocks, provide fixed profit of 3% annually.

3. **Dividend stocks (Coca-Cola, Johnson & Johnson, Procter & Gamble):** generate passive income with a dividend yield of 2-4% per year.

### Medium-Term Trading: Active Management and Trend Identification

The format requires deeper analysis and monitoring of market signals. The strategy is based on fundamental analysis of companies (earnings reports, market capitalization, growth prospects) and technical analysis (charts, indicators, support and resistance levels).

**Advantages:**

1. Optimal balance of risk and return.

2. Ability to profit from price fluctuations over several months.

3. Use of stock screeners (Finviz, TradingView) to find optimal entry points.

### Short-Term Speculations: Maximizing Profits on Volatility

The method focuses on quick trades, using derivative instruments (options, futures, CFDs), and high-frequency trading.

**Approach Example:**

1. **Options trading:** covered call strategy, buying volatility before company reports (Apple, Amazon, Google).

2. **Index futures (S&P 500, Nasdaq-100, Dow Jones):** allow earning on market movements with leverage.

3. **CFD contracts on stocks and commodities (oil, gold):** used for speculation on short timeframes (15 minutes – 1 hour).

4. **Scalping and day trading:** entering the market based on volume trading signals, order book, VWAP level.

## Conclusion

Studying popular stock market instruments helps traders choose strategies that match their goals and risk tolerance. Stocks, bonds, ETFs, derivative formats, and analytical platforms provide flexibility in decision-making. Technological advancements expand trading opportunities, but success depends on in-depth analysis, discipline, and sound capital management.