Lesson 2 of 8
Estimated time: 20 minutes
Understanding Financial Markets
Explore the global financial markets and discover where trading opportunities exist
The Global Financial Ecosystem
Financial markets are platforms where buyers and sellers trade financial securities, commodities, and other fungible items at prices determined by supply and demand. These markets are the backbone of the modern economy, facilitating capital formation and providing liquidity.
Did You Know?
The global financial markets trade over $6 trillion every single day in the forex market alone. That's more than the GDP of Japan, the world's third-largest economy!
Stock Market
What is the Stock Market?
The stock market is where shares of publicly traded companies are bought and sold. When you buy stock, you're purchasing a small piece of ownership in a company. Your profit comes from price appreciation and potentially dividends.
Major Stock Exchanges
- NYSE (New York)$25T market cap
- NASDAQ (New York)$20T market cap
- Tokyo Stock Exchange$6T market cap
- London Stock Exchange$4T market cap
Trading Hours (US Markets)
- Pre-Market4:00 AM - 9:30 AM ET
- Regular Hours9:30 AM - 4:00 PM ET
- After-Hours4:00 PM - 8:00 PM ET
Best For Beginners:
Stocks are excellent for beginners due to extensive educational resources, familiar company names, and straightforward buy/sell mechanics.
Forex Market
What is Forex Trading?
The foreign exchange (forex) market is where currencies are traded. It's the largest and most liquid financial market in the world. Traders profit from changes in exchange rates between currency pairs.
Major Currency Pairs
EUR/USD (Euro/US Dollar)
Most traded pair, 28% of volume
USD/JPY (US Dollar/Yen)
Second most liquid, 13% of volume
GBP/USD (Pound/US Dollar)
"Cable", 11% of volume
USD/CHF (US Dollar/Swiss Franc)
Safe haven pair, 5% of volume
Key Feature:
Forex markets are open 24 hours a day, 5 days a week, following the sun around the globe from Sydney to Tokyo to London to New York.
Cryptocurrency Market
What is Cryptocurrency Trading?
Cryptocurrencies are digital or virtual currencies secured by cryptography. The crypto market operates 24/7/365 and offers high volatility, making it attractive for traders seeking significant price movements.
24/7
Always Open
15,000+
Cryptocurrencies
$2.5T
Market Cap
High Risk Warning:
Crypto markets are extremely volatile and largely unregulated. Price swings of 10-20% in a day are common. Only trade with money you can afford to lose.
Commodities Market
What is Commodity Trading?
Commodities are raw materials or primary agricultural products that can be bought and sold. These include precious metals, energy products, and agricultural goods.
Hard Commodities
- • Gold, Silver, Platinum (Precious Metals)
- • Crude Oil, Natural Gas (Energy)
- • Copper, Aluminum (Industrial Metals)
Soft Commodities
- • Wheat, Corn, Soybeans (Grains)
- • Coffee, Sugar, Cocoa (Softs)
- • Cattle, Pork (Livestock)
Derivatives Markets
Options
Contracts giving the right (but not obligation) to buy or sell an asset at a specific price before expiration.
Example: Buying a call option on Apple stock to profit from price increases with limited risk.
Futures
Standardized contracts to buy or sell an asset at a predetermined price at a future date.
Example: Trading S&P 500 futures to speculate on the overall market direction.
CFDs (Contracts for Difference)
Agreements to exchange the difference in price of an asset from open to close.
Note: CFDs are not available in the US but popular in Europe and Asia.
Choosing Your Market
| Market | Best For | Capital Required | Risk Level |
|---|---|---|---|
| Stocks | Beginners | $500+ | Medium |
| Forex | Active traders | $100+ | High |
| Crypto | Risk tolerant | $50+ | Very High |
| Options | Intermediate | $2,000+ | High |
| Futures | Advanced | $5,000+ | Very High |
Key Takeaways
- Each market has different trading hours - forex is 24/5, crypto is 24/7, stocks have set hours
- Markets vary in size, liquidity, and volatility - choose based on your risk tolerance
- Stocks are generally best for beginners due to familiarity and educational resources
- Derivatives like options and futures offer leverage but require more knowledge
Continue Your Learning Journey
Now that you understand the different financial markets, let's dive into market hours and learn when the best times to trade are for each market.