Exchange trading in financial markets

Exchange trading in financial markets
Forex
Andela Novotna
Author:
Andela Novotna
Published on: 16.06.2021 11:21 (UTC)
Post reading time: 2.11 min
394

An exchange is a legal entity ensuring the work of the organized market of securities for trading stocks, commodities, derivative financial instruments. The main source of income of an exchange market is the commission fee for each completed transaction.

The classification of exchange markets:

  • Stock Exchange is an organized market of securities, the values of which are determined by demand and supply. Stock exchange markets organize the investment of temporarily free funds of individuals and legal entities in securities, which contributes to the displacement of investment fund between various participants of the economy. The largest stock exchanges by market capitalization are the New York Stock Exchange (NYSE), NASDAQ, Tokyo Stock Exchange and London Stock Exchange.
  • Forex Interbank Market is a market of national currencies, the rate of which is formed under the influence of supply and demand. In this market, quotations depend on various economic factors including the purchasing power of national currencies, the discount rates, the economic situation in various countriesand in the entire world.

Due to the abolition of gold standard and the development of communication systems (mainly the Internet), Forex market plays an increasingly important role in the international flow of investment and speculative capital. Operating 24 hours a day, Forex Market is currently the most liquid financial market in the world.

  • Commodity Exchange is an organized market for the purchase and sale of contracts on commodities, the rates of which are determined under conditions of free competition of buyers and sellers. Commodities can be classified into several groups: energy (oil, gas, etc.), metals (gold, silver, copper, etc.) and agricultural (corn, cotton, coffee, sugar, etc.).

One of the world’s largest commodity exchange is the New York Mercantile Exchange (NYMEX).

What is trading on an Exchange?

Trading on an exchange is executed mainly electronically. In order to start trading on exchanges, a trader needs to choose a brokerage company, open a trading account, download and install a trading terminal, make a deposit and start trading. Before starting to trade, it is important to understand the principals of functioning of the market, where the trader is going to conduct his trading activities. It is also necessary to get oriented to the economic and political processes, which can affect the market, and regularly follow them online. Besides, a trader should learn the basic methods and instruments of fundamental and technical analyses.

Financial markets give a good opportunity to earn money, but being that much attractive, they also require considerable efforts. Only constant self-education, self-restraint and good judgment can lead to success. 

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