What are the types of financial markets?

Types of financial markets


Let me tell you in a simple way what are the most important financial markets. By the end of this article, you will have a pretty good understanding of the subject.

Types of financial markets

In this article you will learn...

What are the main types of financial markets?

We show you what are the main types of financial markets in the world, but before that, you need to know what a financial market is.

What is a financial market?

We will tell you that a financial market is a space, physical, such as the New York Stock Exchange or virtual, such as a cryptocurrency exchange where economic agents or operators, such as yourself, exchange financial assets.

We can also tell you that in the financial markets prices are set based on the law of supply and demand.

What does all this mean to me? A lot and a little, but the most important thing that you have to keep in mind is that a financial market is "that thing" that allows you to earn money by buying and selling all types of "things related to the price of things." -financial assets.

Yes, it may be a simplistic view in the extreme and it certainly does not fit a definition. The point is that to understand it, you need more than just a few definitions.

So let's say that financial markets allow people -or institutions, investment funds, banks, etc- to sell and buy things they do not own -such as a ton of coffee-, simply based on the fact that this good has a market price.

Let's say then that the price setter is the market itself, which regulates itself in such a way that it can put in contact, through automated systems, someone who wants to buy "something" with someone who owns it and wants to sell it.

An example could be Brent -oil for friends-. We have all heard about "the price of a barrel of crude oil".. Well, that barrel of crude oil is called Brent. But it could be many other things such as wheat, gold, company shares, a company's growth prospects or even sacks full of a mixture of various "things" that are different in nature but have one thing in common: they are quantifiable in price.

What is the Forex financial market?

It is the largest and most liquid global financial market in the world. It moves more than 4 trillion dollars a day. Some people talk about 5 trillion daily turnover, although I haven't counted the bills yet.

It buys and sells currency pairs - fiat currencies - from around the world and earns profits based on the fluctuation in the price of these currency pairs. This is the market in which we operate with our free product Ducibus Pro.

What is the stock market?

In the stock market, stocks of large companies around the world are bought and sold. Holders of these shares can benefit from the increase in the value of the company. Are you familiar with companies like Google, Amazon, Facebook or Netflix? The CFD on stocks allow them to buy and sell the securities of these large multinationals and benefit from it.

What are stock market indexes?

These are financial instruments composed of the values of shares or stocks of groups of companies. By means of these instruments, the world economic climate and therefore the stock market can be measured. The European IBEX 35 or DAX, the American Dow Jones, Nasdaq 100 or S&P 500, or the Asian Nikkei, are just some of the examples of existing stock market indexes.

What are ETFs?

These are complex financial products made up of different assets such as bonds, stocks, commodities, securities or commodities. Their value depends on the combined value of the financial products of which they are composed.

What is the commodities market?

This market exploits natural assets, converted into materials and consumer goods. They usually behave with a long-term upward trend with high volatility and help to diversify investment portfolios, especially in times of crisis, when they usually experience a significant increase in their quoted prices. The price depends on the real price in the short and medium term and not on speculation about the future, as may occur with stocks. It covers a variety of agricultural products such as grain or the coffeeenergy products such as oil -brent- or natural gasprecious metals such as goldthe silver, palladium o platinumas well as industrials such as the lead or the aluminum.

What are cryptocurrency markets?

Cryptocurrencies are an invention of a guy named Satoshi Nakamoto. I don't know if you have heard of him, but he is a very famous guy of whom nothing is known, not his face, not his voice, not even if he is just one guy, a group of them or even some governmental or interplanetary organization.

There is a lot of literature on the subject of this Satoshi Nakamoto but the most interesting thing we can say right now is that he is credited with the invention of Bitcoin whose digital and unchangeable nature, thanks to smart contracts, is set to revolutionize the way we conceive the world, finance and even our day-to-day lives.

Bitcoin, Ethereum, Ripple, EOS, Litecoin or Dash are some examples of cryptoassets existing in this crypto market through speculative CFD products.

What is an exchange?

Cryptomarkets are also known as "exchanges" - the "place in cyberspace where people exchange their cryptoassets". Exchanges - at least the most reliable ones - are usually set up as companies, although in reality, anyone could have their own exchange. All it takes is a little programming and a little time.

The bad reputation of cryptocurrencies is partly due to this ease of having your own exchange as if you had a turtle in the fish tank at home, considered by many as intangible products with no more value than speculation, more typical of mafia arms dealers than of people who not only believe in blockchain technology, but are convinced -like us- that they are a benefit for the society of the present and a new horizon for the society of the future...

Those who tell you about the intangible and null value of Bitcoin, are the same ones who will come to tell you that the EURUSD is a tangible product with a concrete value. Honestly, I have never seen a EURUSD walking down the street. And if you see one, you should take a selfie with it.

These are the same people who will later tell you that the BAKKT Exchange is cool, but that the rest is useless. They are the same as always, "the strong hands", the institutional capital. They will want you not to speculate with Bitcoin or any of the alternatives, until they are not ready to play at the same table with you... and fleece you.

What are crypto-indexes?

They are financial products like stock indexes, but each one of them is composed of several digital market instruments. Their behavior is highly volatile, investment in them can be very profitable and are a good opportunity for diversification.

Basically, you already know, at least by now, the main financial markets that exist.

Be sure to ask, comment and share if you found the information at least entertaining.

Have you learned anything you didn't know? This is just a start and the explanations we have given you are quite superficial.

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