Introduction to Trading in Financial Markets
This section of the website is dedicated to provide information related to trading in financial markets (contain financial assets). Trading in financial markets requires additional skills in analysis. Technical and Fundamental analysis provides confidence for decision-making. For better selection of financial securities requires foundational and practical knowledge of financial markets.
Foundational knowledge of financial markets has been the same for decades, but practical knowledge of trading in financial markets has changed with the advancement in technology. This writing is intended to introduce and build a mindset for modern-day trading. To become a better market practitioner, one must have to equip himself with the knowledge and strategies the professionals use in their trading. There are trading theories and strategies that are not used today by professionals, but they use the strategies against retailers.
“If
you do not read the newspaper, you are uninformed, if you do read the
newspaper, you are misinformed.”
Now, most of you would think what is the purpose of writing the quoted statement. So, the reason is straightforward, we are influenced by our surroundings. Our surroundings include everything that can influence our decision-making. In trading, the surroundings could be the news related to financial instruments and the economic policies of government. This is a kind of propaganda injected into our minds.
In the realm of trading and investment, institutions call the misinformed “herd” because they are persuaded by the news, they panic, and most of the time they choose the wrong side of the financial market. They reluctantly follow the wrong path until the “Smart Mindset” wins the race. An influenced layman is in the right place but chooses for himself the wrong side. Having an intention to invest capital or start trading in financial markets is not a bad intention but most of the time their entry time is the exit of a smart mindset.
Advertisements play an important role in this regard. Most of the beginners are not even about what they are entering. They just see a wonderful advertisement where candles are fluctuating up and down. Yes, the type of propaganda indeed fascinates but the cost is huge. Getting a proper education is an important point in stepping into anything. When you hear the word “trading in financial markets” you have to know what it is. Trading in financial markets is an activity (an activity of buying and selling) happening in “Financial Markets” but how to decide between buying and selling is the aim of this website.
Understanding trading psychology and looking for what type of trader a person could be are the important domains to cover. There are multiple types of trading and traders could choose one of them by looking at their daily routine, and their psychology. This is because there is a lot of difference between trading and investment. The trader decides to choose the type whether they have the potential to become full-time traders or they are just interested in investment.
Types of Financial Markets
There are multiple types of Financial Markets to trade. Their function in economy is the same. In simple terms, financial market is defined as the marketplace which provides an opportunity to buy and sell the security or the exchange of securities (stocks, foreign exchange, bonds, derivatives, and even cryptocurrencies).
Financial Markets are diverse in nature. Every country designs its own financial markets to fulfill from them an economic function. Some financial markets are small whose jurisdiction and popularity are limited to just one country, while some are internationally known Such as New York Stock Exchange that trades trillion of dollar on daily basis. Here are some types of Financial Markets.
- Stock Market
- Bond Market
- Commodities Market
- Derivatives Market
- Foreign Exchange Market
After the emergence of Bitcoin, and having huge public interest in cryptocurrency make it separate market place with high liquidity.
- Cryptocurrency Market
Stock Market
Every story has its start and Financial Market has stock market because of its ubiquity. This type of market is present in every capitalist country i.e., every country has its own stock market. This market place is used by companies to list their shares which are bought and sold by traders. The purpose of these markets (also included equities market) is to raise capital for companies. Investors invest money for better returns.
Bond Market
Bond is a security and an agreement between the lender and the borrower containing the detail of loan and payment. In bond, investor lends money for a defined period at preestablished interest. This market is also called the debit, credit, and fixed income market.
Stock market and Bond market are also known as capital market.
Commodities Market
It is a marketplace where traders and investors buy and sell natural resources such as corn, oil, gas, gold and many other metals and other things.
Derivatives Market
It is a contract between two or more parties and the value is based upon underlying asset or a group of assets (index).
Foreign Exchange Market
The foreign exchange market is a market place where traders and investors buy, sell, hedge on the exchange rate between currency pairs. This market is the most liquid among other financial markets. This currency market handles more than 7.5 trillion dollar in daily transactions. This market is decentralized consist of international network of computer, banks, hedge funds, investment management firms, retail forex broker, and investors.
Conclusion
This is an introductory writing which aims to provide an insight into the world of trading and investment. Trading itself is an art. There is no end in learning and experiencing financial market. Every day in trading brings to you something special. It sometime tests your psychology. Even losses in the market teaches more than anything else. Although, everything is achievable in financial markets but first traders have to train their minds by understanding what retailers look for, and what professional pursues in financial markets.
There are much more perplexities in each part of this writing which will be discussed in later writings. Most the interest goes to the more liquid markets like Forex and stock but crypto also holds the same position. After understanding the basics of trading in the financial market, we’ll head toward the Analysis of the Market. For further understanding of professionals read (Master the Markets)
FAQS
Financial market is a market place where financial Instruments are traded between participants of the market.
Apart from foundational knowledge of financial market, traders must look for the strategies used by retailers as well as professionals while market analysis. In simple terms, trader must have to be aware about the market analysis techniques.
Novice in the field first look for their primary interests before investing capital in the market. If trading and investing is included in his/her primary interest, then it is compulsory to follow the guideline of professional trader and choose specific type of trading (among intraday, swing trading or long-term investing).
Time factor of financial markets are dependents on its types. Forex Markets are open 24/5 while crypto markets are open 24/7.
Yes, professional in the market operate differently than retailer. They have huge amount amount of money in their accounts and mostly acts when find opportunity in the market. This is because they are privileg.e to see the data which the retailrs are not
Market maker are participants in the market. They provide liquidity to the market and facilitates bid and ask orders.
