The Complete Guide To Successful Financial Markets Trading goes step-by-step through all aspects of trading all major asset classes so that, by the end of it, readers will be in a position to profitably trade whichever of them they wish and, in the process, significantly augment their day-to-day incomes or indeed become full-time financial markets traders.
Whether you are an experienced trader or just starting out, the information in this article offers you strategies to become one of the winners in the financial markets.
Its a quick refresher read, if you will. A look at the types of markets out there, and then a short checklist of requirements to go through and skill-up on, before you take the big step and invest.
What Are the Financial Market Types？What Are the Financial Market Types？
Financial markets refer broadly to any marketplace where the trading of securities occurs, including the stock market, bond market, forex market, and derivatives market, among others. Financial markets are vital to the smooth operation of capitalist economies.
There are many kinds of financial markets, including (but not limited to) forex, money, stock, and bond markets. These markets may include assets or securities that are either listed on regulated exchanges or else trade over-the-counter (OTC). Financial markets trade in all types of securities and are critical to the smooth operation of a capitalist society. When financial markets fail, economic disruption including recession and unemployment can result.
So, lets look at the types of markets first, and the opportunities in trading they may offer.
Stock Market
Perhaps the most ubiquitous of financial markets are stock markets. The stock market is the place for trading the shares of public companies. If said companies perform well, the situation can be very lucrative for owners of their shares. The challenge here though, is to choose the right stocks. Deep knowledge of the market and the performing properties is then key.
Bond Market
A bond is a security in which an investor loans money for a defined period at a pre-established interest rate. You may think of a bond as an agreement between the lender and borrower that contains the details of the loan and its payments. In this market, investors buy bonds from companies who are looking to claim capital to fund projects or investments. The companies then return the amount of the bonds within a stipulated timeframe, with interest, after the project or investment.
Money Markets
Typically the money markets trade in products with highly liquid short-term maturities (of less than one year) and are characterized by a high degree of safety and a relatively low return in interest. At the wholesale level, the money markets involve large-volume trades between institutions and traders. At the retail level, they include money market mutual funds bought by individual investors and money market accounts opened by bank customers. Individuals may also invest in the money markets by buying short-term certificates of deposit (CDs), municipal notes, or U.S. Treasury bills, among other examples.
Derivatives Market
A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset (like a security) or set of assets (like an index). Derivatives are secondary securities whose value is solely derived from the value of the primary security that they are linked to. In and of itself a derivative is worthless. Rather than trading stocks directly, a derivatives market trades in futures and options contracts, and other advanced financial products, that derive their value from underlying instruments like bonds, commodities, currencies, interest rates, market indexes, and stocks.
In the derivatives market, contracts with a value based on a stipulated market value, are traded. An example of this is the buying and selling of natural resources, as in the commodities market.
Commodities Market
Commodities markets are venues where producers and consumers meet to exchange physical commodities such as agricultural products (e.g., corn, livestock, soybeans), energy products (oil, gas, carbon credits), precious metals (gold, silver, platinum), or “soft” commodities (such as cotton, coffee, and sugar). These are known as spot commodity markets, where physical goods are exchanged for money. The bulk of trading in these commodities, however, takes place on derivatives markets that utilize spot commodities as the underlying assets.
Forex Market
The forex (foreign exchange) market is the market in which participants can buy, sell, hedge, and speculate on the exchange rates between currency pairs. The forex market is the most liquid market in the world, as cash is the most liquid of assets. The currency market handles more than $6.6 trillion in daily transactions, which is more than the futures and equity markets combined.
The forex market is made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors.
Lets Talk about getting started Trading
It is clear that your now familiar with the kinds of markets out there, let‘s get down to brass tacks. Here’s what you need to know, to get started as a trader:
Open Your Trading Account
Remember, you can never trade without opening online accounts, so take advantage of the tools in the form of online trading platforms, at your disposal. The moment you‘re there, familiarise yourself with the platform, and get to grips with its system and applications – if you know where everything is, that’ll stand you in good stead for seamless trading when you start to trade.
Knowledge is Definitely a Traders Power
Yes knowledge is the key. The MetaTrader 5 platform linked above is also replete with a number of resources to help you stay on track with market movements, and investment top tips.
Analyse This, and That
To become a successful trader, you need to dedicate yourself to reading and practicing market to know how to analyse price charts. As a trader, your bread and butter is in the subtleties and movements of some very volatile markets. So, try to become adept at the technical side of things – the price predictions that will tell you what the market is doing, where the money is and how to shift your investments toward it.
Dont Jump the Gun. Practice Makes Perfect
Never feel tired of practicing, Platforms like the above mentioned MetaTrader 5 offer a wonderful feature – a virtual trading option. This is basically like a simulator – hypothetical, but very possible, investment scenarios are presented, and you can essentially practice trading with them, and before you have to spend a cent of your actual money.
In details that‘s our quick start guide on financial market types, and how to begin trading on them. The key takeout, then, is to make sure you take the time to gather as much knowledge of a given market as possible. Use the virtual trading option to build your investment know-how. Then, when you’re ready, have a go at it.
Leave a Reply