WHAT ARE FINANCIAL MARKETS?

What You’ll Learn

You’ll learn what financial markets are and the major markets traders can access.

What Is a Financial Market?

A financial market is a marketplace where financial assets are bought and sold.

There are many different financial markets around the world.

Some of the most commonly traded include:

• Forex
• Stocks
• Indices
• Commodities
• Cryptocurrencies
• Bonds

Each market has different characteristics.

Forex

Forex stands for foreign exchange.

It involves buying one currency while simultaneously selling another.

Examples include:

EUR/USD

GBP/USD

USD/JPY

Stocks

Stocks represent ownership in companies.

Examples include companies such as Apple, Microsoft and Tesla.

When you buy a stock, you’re purchasing an ownership interest in that company.

Indices

An index represents a group of companies.

For example, the S&P 500 tracks a large group of major US companies.

Other well-known indices include:

• Nasdaq 100
• FTSE 100
• DAX

Commodities

Commodities are physical resources that can be traded.

Examples include:

• Gold
• Silver
• Oil
• Natural gas

Cryptocurrency

Cryptocurrencies are digital assets.

Examples include:

• Bitcoin
• Ethereum

Crypto markets can behave very differently from traditional financial markets and can experience significant volatility.

Which Market Should Beginners Trade?

There isn’t one universally correct answer.

The important thing is to understand the market you’re trading.

Different markets have different:

• Trading hours
• Volatility
• Costs
• Liquidity
• Drivers
• Risk characteristics

Rather than trying to trade everything, beginners are often better served by learning one or a small number of markets properly.

Key Takeaways

• Financial markets allow assets to be bought and sold.
• Forex, stocks, indices, commodities and crypto are different markets.
• Each market behaves differently.
• Understanding your chosen market is essential.