Different Type of Financial Market

What is stock and the stock market?

Also known as equity is the security of the company that represent the ownership of shares. Shares are units of stock which can be owned by an individual or a business, which are just fractions of a corporation/company.  Say, the company has 1000 share and you own 50 shares among it, which basically means is you own 5% of the company assets and earning. Value of the stock is dynamics, which means it goes up and down depending on how well the company is doing.

Corporations are necessary to sell their stock in order to gain investment and operate their business. Shareholder represents the ownership of the stock they bought and they also become owners of the company. However, they don’t own corporation but shares which are issued by the corporation. Stocks are sold and bought on the stock exchange.

There are two main types of stock, common stock and preferred stock.

Common stock is the securities that represent the ownership of the corporation and this can be done by electing broad of directors by common stockholders through voting. Preferred stockholders tend to have more dividends than common even though it doesn’t have a voting policy.

The stock market is a collection of the market where buying, selling and share issued by companies frequently happen all the time. Such large transaction happens via computers network (OTC) which operates under define set of regulations. The stock exchange is different from the stock market. It is smaller roles plays under market. There are many stock exchange centres around the country where combining all these exchanges becomes the stock market of a country.

Not only currencies are exchanged in the market but also derivative base on stocks, commodities and bonds. One sign of the stock market is that it assures the fair price of its goods due to a huge number of market participants. For example, if there is only one car dealership in the entire city, then the seller can charge any amount to the buyer since there is no other seller in the city. But if the seller numbers grow, then they will have to compete against each other to attract more business which will lead to providing the best price for the customers. Even while online shopping, people tend to look for the best price or sale of the products they wanted by looking through a different seller on the same shopping portal.

What is forex?

It’s a combination of foreign currency and exchange which can be also called as foreign exchange, which is a global marketplace for changing of currency from one to another currency for various reasons through the forex market. Since it involves global exchange, it is the largest and most liquid asset market in the world.

Forex market is a market place where currencies are exchange mainly during foreign trade and business. Say tourism, a French tourist in India can’t use euro because they don’t accept euro locally and had to exchange the currencies.

One big sign of forex is that it doesn’t have its own central marketplace rather all transaction happen via the internet between the traders in the major financial centre around the world like London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney – almost every time zone, which is open 24 hours a day.

What are commodities?

It is economic goods which are interchangeable with other goods of the same types which are used for the production of other goods or services. Quality of commodity may differ depending on producers and they must meet basic grade before they exchange on the market which can be changed rapidly year to year.

Some of the traditional commodities are grains, gold, beef, oil, and natural gas. However, advancing of technologies also have an impact on commodities leading to producing new commodities such as cell phone minutes and bandwidth. Now financial products like foreign currencies and indexes are also included as a commodity.