1. An Introduction to the Markets

Getting Started

So, you want to be a trader, but you don’t know what to trade, how to trade or where to trade?

This is the place to start.

By the end of our trading academy you’ll be informed, enlightened and empowered to start trading for real.

Let’s get down to business; if you want to trade the financial markets, you need to understand what the financial markets are.

If you are confused or not sure, don’t worry, you may know more than you think you do. The financial markets have many names such as the stock market, capital markets, and even just the markets. Put simply, the financial markets are where buyers and sellers can participate in the trading of assets.

There are different types of markets, different participants, different products and even different types of investors. To understand the markets fully, it’s important to understand all the players involved.

Financial Markets

The financial markets are basically an 'International flow of money chasing money'.

There are 3 Main Global Centers located across the world in Tokyo, London, New York.

And there are even more types of MarketsFOREX & Money Markets, Equities, Commodities, Fixed Income & ETF Markets & Emerging Markets.

These different products are traded on what are known as Exchanges. One of the most well known exchanges for example is the NYSE(New York Stock Exchange).

Market Participants

Now that you have a basic understanding of what the financial markets are let’s take a look at the institutions and corporations that make them.

A list of the main market participants are;

Commercial Banks – Retail and Investment Banks

Brokers – Electronic and Voice Brokers

Institutional Investors – Corporate and Investment Institutions e.g. Pension Funds / Hedge Funds

Central Banks – such as the BoE (Bank of England)

Types of Product

Next let’s move on to what is actually traded on the financial markets.
There are essentially two different methods of Trading;

The first is Exchange Based Trading
Trading which is conducted on a centralized, highly regulated exchange
Example:

  • NYSE - New York Stock Exchange
  • NYMEX-COMEX - New York Mercantile Exchange - Commodity Exchange
  • CME - Chicago Mercantile Exchange
  • CBOT - Chicago Board of Trade
  • LSE - London Stock Exchange
  • LME - London Metal Exchange
  • IPE - International Petroleum Exchange

The second is Over the Counter trading (OTC)
A security traded off an exchange, usually directly between banks through a dealer network
Example: The Inter Bank Currency Market, The Derivatives & Bond Markets.

Types of Investor

What kind of trader are you? There are several different styles of trading which will more often than not categorise a trader into one of the two below;

Hedger - A person whose primary motivation is not seeking profits, but instead to reduce the risk of adverse price movements in a security

Speculator - A person seeking large profits in return for large risks by trying to anticipate price movements, in the hope of making quick, large gains

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