When we talk about trading market it means financial market. There are various kinds of financial markets where traders, investors, speculators, and hedgers make money and build the economy. The financial market is the biggest market and it ranges from various activities like capital & money market, commodity & forex market etc. Every market has its own advantages & disadvantages but the ultimate aim of every market is to make money. Not everyone can make money only a person who understands the market makes money. We are going to discuss in brief about various trading markets-
Capital market is the oldest and most popular market in the world. In the capital market stocks are traded. Stocks are monetary values of any company or organization that are reflected in the form of a share. If a company performs well then its stock price increases and if it performs poorly then its stock price decreases. People who invest in stock for a longer period of term are called investors; people who trade in a stock market for short term means closing positions on the same day are called traders. Investors control the company and change its policy and performance.
Money Market: Money market is the market where government bonds, corporate bonds and commercial paper etc. are traded. People can invest in the money market to earn fixed income. Bonds are a very good example to earn a fixed amount of money every year and at the end you get your principal back. There are two types of bond short term and long term. Short term bonds are for 1-3 years however long term bonds are for more than 5-10 years. Interest rates and bond value work in a reverse direction, if interest rate increases the value of bond decreases and if interest rate decreases the value of bond increases.
In commodities market various kinds of commodities including natural resources are traded on specific exchanges like the Chicago Mercantile Exchange. Commodities market trades everything from oil, zinc, copper, wheat, sugar, gold, silver etc. The commodities market has a great part in movement of consumer price inflation. When commodities trade at higher prices means inflation would rise however lower commodity prices would dampen the inflation. Commodity market can change the behavioral pattern of an economy.
Forex market is the biggest financial market in the world with total volume of $ 5 trillion that is almost 100 times the combined volume of New York, Tokyo & London exchange. Currency is traded in the forex market; the chief players are commercial banks, hedge funds and retail traders. Forex market trades in spot and future. Forex spot is traded on the OTC (over the counter) and forex futures are traded on future exchanges.