What are the principles of the functioning of financial markets in fact?

Ted Capwell Updated:

The world economy is based on market relations. Every day we spend money buying certain goods and paying for services, while selling our time and skills in the labor market for the same money. Thus, we are all drawn into the endless cycle of finance.

With the widespread use of the Internet, millions of users worldwide have gained access to exchange transactions. When meeting with trading first thing you need to learn the principles of the functioning of the markets and how everything works in reality.


principles of functioning of financial markets


Currency exchange

When money was invented, they were provided with gold and corresponded to the gold reserves of the state in which they were in use. However, everything led to the fact that there was more money than gold, so they had a price. The price of a national currency is its rate in terms of a currency quoted in another state. Course movement is the result of the interaction of a huge number of economic trends and factors.

For the growth and development of the economy, the implementation of political tasks, compliance with financial obligations and carried out large-scale currency exchanges, which have a significant impact on changes in exchange rates. The most popular exchange currency is the US dollar. Every day on the Internet exchanges made operations for 3 trillion dollars.

Commodity Exchange

This direction is represented exclusively by the exchange market. The stock exchange is regulated by the legislature, which assumes obligations to monitor the implementation of contracts.

To determine the value of the goods used securities. They are represented by stocks, commodity options and futures. At the commodity exchange, 4 groups of goods are traded:

1. metals (gold, silver);

2. soft goods (grain, coffee, tomatoes);

3. agricultural goods (equipment, livestock);

4. energy carriers (oil, gas).

The cost of goods is influenced by supply and demand, the quality of exported and imported products, the political situation in the country and the world. In addition, prices are influenced by exchange rates, while commodity prices also affect currency quotes – this feature of the market is called correlation.

Stock Exchange

The stock market undergo operations with securities. They can be divided into 2 groups:

1. shares of companies;

2. government bonds.

Shares of enterprises are used in speculative trading for profit. In the role of large players are often wealthy companies, buying shares to take over the company. Buying shares is interesting for investors who invest in promising areas of the economy.

Government bonds include OFZ treasury notes, which have different yields and terms. Execution of stock contracts is guaranteed by the state.

A distinctive feature of the currency from goods and stocks is its higher liquidity. At the same time, currencies of different countries have different liquidity, which, again, is reflected in the global foreign exchange market.

How to start trading on the stock exchange

For trading on the exchange, the exchange participant must have a minimum amount of foreign exchange capital. In international markets, this amount starts at $ 1 million, which is a very heavy amount for most ordinary traders.

That is why the services of brokers that serve retail customers have become popular. For example, Binarium works in the area of ​​short-term fixed-income contracts. In order to get access to the charts of various assets, it is enough to register on the trading platform.

An additional bonus is the ability to enter into transactions, predicting a change in the exchange rate in the near future. For example, the dollar against the ruble is now 66, but it is growing steadily. You can make a deal on the fact that the dollar rate in a month will be higher than 66 rubles, and if it happens, you will receive a fixed profit (up to 90%) on the balance.

The advantage of Binarium is accessibility for private traders. While many brokers have a minimum deposit of thousands of dollars, you can start working fully by replenishing the account with only 600 rubles.

To increase trade efficiency, Binarium has a variety of analytical tools – indicators, signals, trend monitoring. Novice traders can take a course and begin to understand the basics of trading already on the first day they are introduced to the trading platform.

Leverage and Margin Trading

Many brokers provide leverage. It allows you to increase the deposit several hundred times for the conclusion of a single transaction. For example, having a deposit of $ 1,000 and a leverage of 1: 100, a trader can purchase a lot worth $ 100,000.

The higher the leverage, the greater the profit a trader can get, but at the same time the risks of capital loss increase significantly. Therefore, it is recommended to carefully study the market, weigh the pros and cons, and in no case do not open the transaction “blindly.”

The term “Margin” refers to the pledge of a broker for a loan. This pledge does not exceed the amount of the deposit – it does not allow you to go into a minus and not remain indebted to the broker.

Who is involved in the trade?

Every day, millions of people participate in currency and securities trading. Some are banks, other funds, third brokerage companies, the fourth work on the stock exchange, and a considerable part consists of independent financial analysts.

Knowing who is involved in trade, and what goals it has, you will be easier to adapt to market realities. Having caught the general mood of the market, you will be able to predict the direction of the chart and get profit on it.

First of all, Central Banks participate in the auction. Their task is to regulate the national currency quotes. In order to have the necessary influence on the exchange rate, the Central Banks make large operations on the sale or purchase of foreign currency.

Commercial banks buy / sell currencies at the request of customers. They provide foreign trade capital flows.

Funds are cumulative, insurance, pension, etc. They are created for trust management of clients’ investments.

The stock exchange is engaged in providing conditions for the circulation of currencies and securities. In addition, the stock exchange provides arbitrage and identifies the equilibrium exchange price.

Brokers provide services to private traders. With their help, customer requests go to the international market.

Finally, private traders also have a share in market trading volumes. It is noteworthy that independent analysts have no chance to expand the market, but they can significantly affect the duration and depth of the trend.

Hours exchanges and brokers

Trading floors usually work on weekdays from 10 am to 6 pm local time. Due to the huge number of time zones, for traders, asset trading continues non-stop five days a week.

Brokers end their work at 21:30 GMT on Friday night on Saturday, and begin working on Sunday night on Monday at 21:30 GMT. As for holidays, in all countries there are different red dates, and when the exchanges of some states rest, others work, ensuring a continuous trading process.

In recent years, the trade in cryptocurrencies on special exchanges has become widespread. These trading platforms operate 24/7. Cryptocurrencies such as Bitcoin and Ethereum are already used as trading tools by many brokers, however, we will focus on the most popular classical currencies.

Most popular currencies for trading

The main currencies in international trading are as follows:

● USD – US dollar;

● EUR – EU single currency;

● GBP – British pound;

● JPY – Japanese Yen

● CHF – Swiss Franc.

The most popular currency pairs have a dollar as their base or quoted currency. Here they are:

● EUR / USD;

● GBP / USD;

● USD / JPY;

● USD / CHF.

The first currency – the base one, acts as a commodity, the second currency – the quoted one, means the price for the goods.

At the initial stage of training in financial trading, you should pay the most attention to the dollar, as well as the currencies with which it is paired in the list of the most traded. After studying the market mechanisms and the fact that they are set in motion on the example of these currencies, you will receive important fundamental knowledge of the market, you can start earning on trading and improve your skills further.


“General Risk Warning: Binary options and cryptocurrency trading carry a high level of risk and can result in the loss of all your funds.”