📈 How Markets Work

Understand how financial markets operate, why they matter, and how investors interact with them.

Introduction

Markets are where buyers and sellers meet to exchange assets.
They provide liquidity, transparency, and a mechanism for price discovery.

1. What Are Markets?

  • Definition: Organized systems for trading assets like stocks, bonds, commodities, and currencies.
  • Purpose: Enable efficient exchange and allocation of capital.
  • Examples: New York Stock Exchange (NYSE), NASDAQ, London Stock Exchange.

2. How Do Markets Function?

  • Supply & Demand: Prices move based on buying and selling pressure.
  • Market Participants: Investors, traders, institutions, governments.
  • Mechanisms: Auctions, electronic trading, over‑the‑counter deals.

👉 Key Insight: Markets balance risk and reward by matching buyers and sellers.

3. Types of Markets

  • Stock Markets: Shares of companies.
  • Bond Markets: Debt instruments.
  • Commodity Markets: Goods like oil, gold, wheat.
  • Currency Markets (Forex): Exchange of global currencies.

4. Why Markets Matter

  • Provide access to capital for businesses.
  • Allow investors to grow wealth.
  • Reflect economic health and sentiment.
  • Influence global trade and policy.

Conclusion

Understanding markets is essential for any investor.
They set the stage for building portfolios and making informed financial decisions.