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The EagleFX Beginners Guide – Financial Markets

Currencies / Forex Trading Aug 15, 2019 - 11:54 AM GMT

By: Kavinesh_A

Currencies

A financial market is a market where derivatives at low transaction costs, commodities, foreign exchange and financial securities (bonds, precious metals and stocks) are traded by people. In elementary terms, they can be described as markets where investors make money, companies reduce risks and businesses approach to raise funds for growth. Bonds and currency trading are done mainly on bilateral basis even though some trade on a stock exchange, also recently electronic systems are being built for stock exchange purposes.


Types of Financial Markets

1. The Capital MarketThis subsists of two markets:

         Stock Market: The shares of ownership of a public corporation that broker-dealers sell to investors are known as stocks. A sequence of exchanges where huge amount of cash are being raised by successful corporations for expansion is called the stock market. Profit is being made by investors when the earnings of companies are increased. Buying stocks can be easy but knowing the right company to use can be a daunting task, hence this guide by www.eaglefx.com.

         Bond Market: When the prices of stocks spring up, bond prices drop. Companies and organisations approach the bond market to secure very large loan sums. Types of bonds include municipal bonds, treasury bonds and corporate bonds. The smooth operations of large economies like the US are due to the liquidity of bonds.

2. Mutual Funds

The capacity to buy a good number of stocks at once is made possible in the mutual funds market. This shows that they stand as a better alternative to investing in individual stocks. Even if it’s a great alternative, you still need some professional guide to make the right decision.

3. The Commodities Market

Companies approach this market to buy or sell natural resources in order to offset their future risks. Due to the volatility of the prices of things like gold, oil and metal, companies find a way to hold on tight to the price of the day. Most investors trade the commodity market with the profit-only mindset because of the public nature of the market, meaning they have absolutely no intent to buy large quantities of commodities.

4. Derivatives

Tools for management of financial risks are provided in the derivatives market. Risk- taking investors venture into the murky waters of this market because of its intricate financial products of which its value is based on hidden assets. These investors use it to aggravate their probable gains.

5. Foreign Exchange (Forex) Trading

This is a decentralized market global market where the buying and selling of currencies takes place. More than $5.3 trillion are traded daily as one – fourth of the trades are executed by banks worldwide to lessen the risks for their customers to do business overseas. The dominant currency in this market is the US dollar as it occupies a huge 87% of the entire market. For detailed information on how to get started on FX trading.

The Need for Financial Markets
 Financial markets have succeeded in creating open and regulated systems for companies so they can acquire huge amounts of capitals which is done through stocks and bond. Transparency plays a big role since the markets are public and many businesses find it easy to offset risk with commodities, derivatives and foreign exchange future contracts.

By Kavinesh

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© 2019 Kavinesh - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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