Stocks and shares are not the only things traded on a daily bases on the world financial markets. Bonds, options and futures are also traded. The main emphasis of the site is online stock trading but it’s worth looking briefly at the other markets you can trade in.
The Stock Markets
Various local and international stock exchanges exist around the world to trade the stocks of publicly owned companies. A share or stock denotes a partial ownership of the company but that is not why most investors or traders buy shares. They hope to see the value of their purchase increase in order to make a profit on selling.
Commodities exchanges facilitate this type of trading. Basically you buy into a contact whereby you try to predict the the value of a commodity at a point in the future. Many futures contracts are based on a physical commodity, oil or grain for example, but they can also be based on the future value of stock indexes.
Companies & Governments sell bonds to borrow cash. In return the bond purchaser receives a fixed amount of interest over a set period. Bonds are solely debt and confer no ownership rights but are usually safer as they rank ahead of ordinary shares in the event a company goes belly up. They are not really a trading instrument for the individual trader so we won’t be covering them any further.
An option is the right to buy or sell an underlying asset for a predetermined price at a set point in the future. Options are also known as derivatives and can be exercised before the option expires. You will need a specialist options broker for option trading.
The forex market is the largest financial market of all dealing in billions of dollars of foreign currency.