Financial markets – everything you need to know

by Shaista Shaikh
Financial markets – everything you need to know

Financial markets appear to have been the engine of international trade and the global economy as a whole for 100 years. And it’s all the more accurate over the past 25 years when financial markets have become more complex, sophisticated, and important.

At the start of the 21st century, global financial markets became more dynamic and rapidly changed. Today there are fewer controls on trade and capital, more global financial transactions, and more payment systems in general.

Moreover, international capital flows, the advent of new financial instruments, and new digital technologies are also changing rapidly. This leads to more open and advanced financial methods and markets.

Financial markets definition

A financial market represents the exchange and trade of financial securities on a national and global level. Traders buy and sell securities intending to make potential profits while trying to limit their risks as much as possible.

Access the financial market via online trading platforms

Financial markets used to be available for investment only through financial institutions, usually banks. Fortunately, internet magic has brought the world of finance into everyone’s home. People worldwide can access any market from cryptos to stock using various brokerage companies’ services and the benefits of their trading platforms

For example, the best trading platform for forex and CFDs is arguably MetaTrader 4 Supreme Edition. Traders can use scalping strategies on a wide range of financial instruments, including currency pairs, commodity CFDs, and stock index CFDs. The MetaTrader platform is easy to use, fast and intuitive. 

Nevertheless, every trading intermediary i.e. the brokerage company might have a different choice of trading software which is part of the information you can check on by reading the broker review

Types of financial markets

Each financial market has its own trend, potential, and risks. Here is an overview of the different types of financial markets.

The Forex Market

The forex market’s growth and its volume have been impressive over the past 40 years: from $ 5 billion in 1977 to over $ 5,000 billion in 2017. Several key factors are relevant to this trend:

  • Advances in technology
  • Greater price volatility
  • Better access to financial markets through brokers
  • More trading tools and easier access to information

Forex is a trendy market with traders looking for short to medium-term trading opportunities.

Derivatives Markets

Derivatives are securities that are linked to an underlying asset. Speculators use them for hedging against price fluctuations. CFDs, options, and futures are all examples of derivatives. Market speculators can use these instruments to hedge against risk or take risks to realize potential financial gains.

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Commodities

The commodities market includes commodities such as gold, silver, oil, and agricultural commodities such as wheat, soybeans,, and corn. Investors and traders can participate indirectly in this market by buying stocks or directly by buying options, futures, or CFDs.

Capital Markets

Capital markets include equity and bond markets (private and public sector bonds). Furthermore, these markets fall into two broad categories. First is the primary market where companies and governments issue new securities and the secondary market where previously issued stocks and bonds are traded.

The Insurance And Mortgage Markets

Mortgage markets revolve around long-term loans suitable for the purchase of a property. These loans can be traded in the secondary market. When it comes to insurance markets, these involve the insurer and the insured, where the insurance risk is transferred for a premium. Insurance companies have large reserves of cash, which they invest in stocks, bonds, and derivatives.

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Money Markets

Money markets are focusing on very short-term debt and involve local banks and central banks. Banks lend funds to each other for short-term liquidity purposes. The central bank is often the lender of last resort.

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