The Functions of Financial Market

Financial Market

Financial Market refers to a marketplace, where creation and trading of financial assets, such as shares, debentures, bonds, derivatives, currencies, etc. take place. It plays a crucial role in allocating limited resources, in the country’s economy. It acts as an intermediary between the savers and investors by mobilizing funds between them.  The financial market provides a platform to the buyers and sellers, to meet, for trading assets at a price determined by the demand and supply forces.

The functions of the financial market are explained with the help of points below:

  • It facilitates mobilisation of savings and puts it to the most productive uses. 
  • It helps in determining the price of the securities. The frequent interaction between investors helps in fixing the price of securities, on the basis of their demand and supply in the market. 
  • It provides liquidity to tradable assets, by facilitating the exchange, as the investors can readily sell their securities and convert assets into cash. 
  • It saves the time, money and efforts of the parties, as they don’t have to waste resources to find probable buyers or sellers of securities. Further, it reduces cost by providing valuable information, regarding the securities traded in the financial market.

The financial market may or may not have a physical location, i.e. the exchange of asset between the parties can also take place over the internet or phone also.

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FINANCIAL MARKET TRADING

Stocks Trading

By trading stocks, you are provided with the opportunity to benefit not only from businesses that are doing well but also from failing businesses, as you can trade both with the stock and against it. There’s no better time to invest than now in the wake of crisis.

Options Trading

Options are a flexible investment tool that can help you take advantage of any market condition. Options Trading involves buying and selling options contracts on the public exchanges and, broadly speaking, it's very similar to stock trading.

Forex Trading

The Forex Market is by far the biggest and most popular financial market in the world. It is traded globally  with an  average trading volume of about $5.1 Trillion per day in 2019 . Forex trading has been in existence for many years.

Crypto Trading

This type of trading involves exchanging one cryptocurrency for another, buying and selling coins, and exchanging fiat money into crypto. It bears some similarities to foreign exchange (forex), where fiat currencies from across the globe are traded 24 hours a day.

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Risk Warning

Trading in the financial markets (including trading on margin) provides a wide range of opportunities and enables investors who are ready to take risks to make high profits. However, it carries a potentially high level of risk of loss at the same time. You should never invest money that you cannot afford to lose. Therefore, prior to trading you should take into careful consideration whether such operations are suitable for you in terms of your level of knowledge and financial situation. Your due diligence and education on Trading & Investments is therefore highly recommended.

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