About MarketsWhat are financial markets?


  • A financial market is the system through which financial assets are negotiated. It’s made by exchanges between buyers and sellers for certain assets such as equity securities (Stock), bonds (forex) and derivatives (speculative financial instruments linked to an underlying asset).

     

    • How prices are made

    Markets are represented by the price of goods whose price is moving due to the constant encounter of demand and supply. One party can purchase a certain amount of good, just because there is another counterpart willing to buy it, and vice versa.

    If there is a greater number of vendors than those willing to buy, the price will tend to decrease. When the amount of sales and purchases is the same, the price tends to stay.

    If the purchase quantities start to be higher than the ones in the sale the price will tend to increase. This mechanism is what makes every price movement.

     

    • Regulated markets

    Regulated financial markets are multilateral trading systems (a crossbetween supply and demand) with both officially quoted shares and bonds within the same system.

    They are one of the most vital and important field in the economy, as they provide businesses and governments with new funding from small and large investors.

    Prices in this market are officially quoted at any time, as the system is constantly licensed and regulated by the authority control. Almost all countries have this kind of market, and each of these countries has a controlling body that regulates not only pricing, but also costs and commissions.

    The principal regulated markets in the world are the "New York Stock Exchange" (NYSE), and the "London Stock Exchance" (LSE).

     

    • Unregulated markets

    They are commonly referred to as "over-the-counter" or "OTC markets" to cover all those alternative trading systems different fromthe official markets, but no less important from the point of view of transactions as they all belong to the forex currency. Apart from forex, derivate are mostly present in these types of market.

    These markets have bargaining systems characterized by the absence of official quotations; in fact, prices are always created by demand and supply, but run by a dense communication of the interbank network.

    Another feature is their lack of central control and regulation bodies of prices and commissions of individual exchanges, which can be contracted privately by intermediary brokers.

    There are control bodies in each country (SEC for the United States, FSA for England, cysec for Cyprus etc.) that look after these markets and specifically: protect consumers, protect and improve the integrity of the financial system, and promote a healthy competition between financial service providers in the interests of consumers.

     

    • Forex

    It represents the  foreign exchange market of currency exchange. It can be considered the largest financial market in the world, as well as being the most liquid as its transactions today amount to roughly $3 billion.

    As already mentioned, forex works on an unregulated market, but compared to other regulated markets, it reflects the trend of global economies, so it is more predictable and less influenced by external factors.

    Just because of the huge volume of transactions it is an extremely liquid market, andthe exchange transactions can be followed at any time of the day as it is virtually impossible not to find a buyer and resell the currency you own.

    In fact, the volume of daily runs is difficult to determine as it relates to an unregulated market, however, it is estimated at roughly $1.900 billion.

    Forex trading is open 24 hours a day from Sunday night (opening of the Asian market) until Friday evening (closing of the American market).

Interviews

  • the Analyst's answer

    Jean Grossett - Financial analyst

    In the present era where investment is seen as a major part of a normal spending fixture of a common individual and stocks have become one of the common options in financial charts; it is important to understand the market before one starts investing. One needs to research and invest his time on knowing various markets and choosing which one should match his/her investment method and trading style before investing the money.

    If you are a new investor who is just starting to know the market, regulated market would be a great place to start. The fact that every aspect of the market is regulated and is governed by legal authorities enables an investor to invest their funds securely and helps them understand the market. However in case one is looking to invest through a broker, Forex market can be great for your investment. 

  • the Manager's answer

    Robert Danvil - Investment Manager

    Finance market is a giant, however with all the pros comes the cons as well. While the market is the safest and easiest way to gain on your investment, it is prone to external factors like market situation and internal factors like unregulated brokers and agencies. It is always recommended to new traders and investors to trade on the market with regulated brokers and organizations and enable a proper analysis before investing in any market to prevent losses.

Members Comments

  1. Profile photo gravatar of Amani Herzog
    Amani Herzog (lesley-kirlin)
    says:

    Financial markets are a great place to work or trade. They are volatile and you can earn a lot of money if properly managed. Stock market is known to every person but forex is more risky and profitable than stocks because leverage factor.

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