What Are Financial Markets And Its Types?

financial markets

Financial Markets are a marketplace where traders from around the world sell and buy their assets, including bonds, commodities, stocks, derivatives, and foreign exchange. It is also considered a place where investors make money and companies reduce risks in the financial market.

Financial markets help businessmen in the growth of their business as it facilitates liquidity. Entrepreneurs also benefit from financial markets as they raise money for their startups. They reduce the risk and calm the economy by hiding the statistics from the public.

Read ahead to know about the financial markets and its types:

Stock Market

Stocks are shares possessed by someone which shows the fraction of ownership of a corporation that could be sold to potential investors who want to invest in an organization. Brokers help these investors in buying/selling of shares.

This market helps corporations in raising a lot of money or capital by selling the companies stocks to expand the business. The investors also profit themselves as the company gradually earns more and more.

Buying and selling of stocks require a lot of experience. You cannot trust/rely on the market solely as it depends on a lot of factors and changes very quickly. 

Bond Market

The bond market is suitable or the best options for companies/organizations to obtain huge loans. This is because the price of bonds goes down with an increase in the price of stocks. The bond market consists of different types of bonds, i.e, corporate bonds, treasury bonds, and municipal bonds.

Commodities Market

 If a company is interested in selling or buying natural resources, there is always a risk associated with that. A commodity market offset their futures risks as the prices of gold, corn, or oil are volatile, and a slight impact on the economy can change the demographics of any organization.

The commodity market is interlinked and impacts in a very proportionate way if we consider gold prices that usually go up with a little economic uncertainty in the world.

Derivatives

They are little more complicated financial products that have a base value in underlying assets. If a bank lends some money to a homebuyer and then the bank sells the mortgage to someone else that provides more funds to the bank for approving new loans.

Forex Trading

It is more of a decentralized global market trading by exchanging and selling the currencies. Most of the trades are done by the banks to reduce the volatility of overseas business for their customers.

This trading is directly linked to the currencies affecting the exchange rates and the overall financial stability.

Equity trading

Equity trading is about investing in the equity capital markets to exchange money for a company’s stocks instead of their bonds. A trader dealing in equity markets sells and buys company shares; it’s more similar to investing in the debt capital market. They buy and sell both securities and commodities comprising stocks, bonds, oil, gold, and others related to it.

Equity traders evaluate the revenue and cost of agreements for predicting what a stock might do given historic activities and data.

Conclusion

There could be many more reasons to know about the introduction to financial markets and trading, but all of them can only be explored after pursuing a course in trading.

Since the markets are public, you can have a proper look into this transparent and open way to set prices on everything that’s traded.

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