The financial market is the one thing that can either make or break a nation. It provides individuals, businesses and government authorities with financial resources. It also helps in bringing down the unemployment rate of a country by providing well-paying jobs to people.
With that being said, are you planning to become a part of the financial market? Do you have what it takes to be there? We are not talking about the appetite for risks or about your financial abilities; we are talking about your general insight into the market.
If you don’t have that then this post is for you!
Let’s begin with a simple definition of a typical financial market – it is a place where sellers and buyers meet to exchange services or goods at prices that are pre-set by the global supply and demand for the same.
Some examples of financial markets include:
- The stock market
- The bond market
- The real estate market
- FOREX trading
- Crypto trading
With that being said, let us take a closer look at each of the above-given examples in order to strengthen your introduction to financial markets.
The stock market
A financial market where the participating parties are awarded financing with the buying, issuance, and selling of shares of stock is known as a stock market.
It is a form of the capital market and is generally suitable for people who are looking for long-term investment mediums. Here stocks are sold and bought at prices that are directly affected by global demand and supply.
The New York Stock Exchange a.k.a. NYSE is the best example of a typical stock market.
The bond market
A financial market where the participating parties are awarded financing through the selling, issuance or buying of bonds is known as the bond market.
It is just another example of a capital market since it is mostly preferred by people who love to put their money as a form of long-term investment.
The real estate market
The financial market where financing is provided to the parties involved through real estate transactions is known as a real estate market.
A typical real estate transaction will involve either the buying or selling physical real estate assets. It could be a house, a condo or a piece of land located in a prime location.
It is one of the best examples of a capital market since real estate assets are bought to increase the wealth of an individual or a corporation.
The act of selling and buying foreign currencies is defined as FOREX trading.
When it comes to FOREX trading, the parties involved are mostly:
- Individual traders
- Large corporations
- Commercial/non-commercial/central banks
- Institutional investors.
These parties conduct FOREX trading for a plethora of reasons. Some of the most common reasons are:
- Market balancing
- Facilitating international tourism
- Facilitating international trade
- Simply to make some money on the sides!
Crypto trading, otherwise known as cryptocurrency trading is just another technical term for trading where traders use cryptocurrencies as a trading medium. Similar to foreign exchange trading, you would need to either buy or sell one form of cryptocurrency for another.
Some examples are –
- Bitcoin for Euro and USD.
Cryptocurrency trading is the most lucrative way to make it big minus the headache of mining it.
If you are aware of the intricate details about the financial market then it would be easier for you to make it big in no time! On the flip side, going all-in without preparing for the risks involved in the financial market is a mistake.