The idea of trading in financial markets has evolved over the years and is no longer limited to wealthy businessmen and investors. Today, anyone can start trading and achieve a basic or additional return through thousands of trading opportunities and assets available in the markets.
Financial markets differ according to the nature of the assets present in them, as Forex trading depends on foreign exchange rates, while the stock exchange market is limited to the activities of international companies. The technological development witnessed in our time has led to the introduction of all online trading markets, where all you need today is an Internet connection and finding a reliable trading broker. Despite the simplicity of these steps, they may seem complicated to a beginner, so below we will explain each step in detail.
What are Financial Markets?
Financial markets, or stock exchanges, refer to a place where traders and investors gather to watch the movements of economic items such as currencies, corporate stocks, commodities, and government bonds, build expectations about their prices, and then buy and sell them. This process of buying and selling is called trading.
Traders trade these assets to make financial gains, and the basic principle of trading is to buy a commodity and then sell it when its price rises to make profits. This principle applies to all financial markets, as traders monitor global news and developments of events related to companies, currencies, and the global economy to anticipate expected trends in each market and trade assets.
The Most Famous Financial Markets
The financial markets you can view in an online trading platform vary. There are several trading platforms that offer various assets and trading opportunities. The trader usually chooses the market that he knows well and is good at analyzing its events, or the markets that offer the greatest returns.
Foreign Exchange Market
Global foreign currencies are traded in this market in pairs. There are approximately 180 currencies in the world, and each of them has an exchange rate that differs between the currencies with which it is exchanged. For example, the most popular currency pair is EUR/USD, which has an average of 1.10.
Which means that every 1 Euro equals 1.10 US dollars. Each currency pair has a different price that changes according to the degree of supply and demand for one of the two currencies of the pair. For example, if the European Central Bank supplies more euros to the market, the supply of the euro is increased its price against the dollar decreases, and the price of the EUR/USD pair falls.
Stock Market
The stock market deals with international companies that have gone public to put their shares on the market. The word stock refers to an ownership share of the value of a particular company. By purchasing Apple stock, for example, the trader obtains a share of the company’s value.
Stock prices change according to the company’s activities and news related to it. Investors follow company news, such as annual reports and earnings reports, or any miscellaneous news about them, such as management changes, so that traders analyze the impact of the news on the future movement of the stock and make appropriate transactions.
Commodity Market
The commodities market includes traditional raw materials such as rice, coffee, sugar, and flour. In addition to gas, fuel, and oil, which is the most traded commodity in the world due to its strong connection to global news and other markets such as currencies and company shares. In addition to these commodities, mineral resources such as gold, silver, copper, and others are added.
The prices of these goods change according to supply and demand. For example, if Saudi Arabia increases oil production, the price of the oil commodity will decrease due to increased supply, and vice versa.
Cryptocurrency Market
Cryptocurrencies have taken the trading world by storm in the last ten years. It is virtual money that is stored and traded over the Internet. There are thousands of cryptocurrencies, each of which has a price indicated in dollars. Moreover, cryptocurrency prices vary according to the demand for the currency. Technological developments are associated with this particular cryptocurrency, which may also increase demand for it.
With thousands of digital currencies, some currencies are stronger than others, such as Bitcoin and Ethereum. These are considered to be the two best currencies in the crypto world due to their antiquity and great development over the years. The prices of these currencies have grown, and their uses have greatly developed.
Steps to Start Trading
After understanding the workings and types of financial markets, we will summarize for you how to start trading:
- Find a reliable online trading broker.
- Create an account on the broker’s website and deposit according to the payment terms.
- View all the markets and learn how the markets move and the factors that affect them.
- Start with the market that interests you most and that you understand best.
- Start small by trading simple trades that do not exceed the minimum limits to learn.
FAQs
What are financial markets, and how do they function?
Financial markets, or stock exchanges, are gathering places for traders and investors. Currencies, corporate stocks, commodities, government bonds. All kinds of economic products are traded on these markets.
How does a beginner go about getting into trading in financial markets?
Additionally, here are some steps to go through before you can begin trading.
- Locate a Trustworthy Online Trading Broker.
- Open an account on the broker’s website and pay as requested.
- Investigate and analyze all possible markets. Know market trends and the factors involved.
- Pick a market you are familiar with and are interested in.
- Learn from small trades to reach the minimum limits set by the exchange.
- The steps above serves as a step-by-step guide for beginners wishing to get involved in financial trading.