SUMMARY

• A financial market allows people and companies to buy and sell financial products such as stocks, bonds, and currencies
• Many people do not require the financial products themselves, but buy and sell them to profit from price fluctuations. Some people aim to make short term gains while others will wait to make gains in the future
• A company can raise money for its business needs by listing on a stock exchange and selling shares in its ownership in return for cash
• A stock index (plural indicies) is a listing of stocks which have something in common and are traded on the same exchange. For example, the FTSE 100 is a list of the 100 largest companies (in terms of market capitalization) which are traded on the London Stock Exchange
• The price of a stock index reflects the combined share prices of the companies which make up the index. If the share prices of the companies in an index go up, the value of the index itself can go up
• A company can raise money for its business needs by issuing a bond in return for cash. If you buy a bond from an organisation you essentially lend them money, which they will one day pay back with interest
• The commodities markets deal with the buying and selling of raw materials, eg, oil, gold, diamonds, cattle and coffee
• The foreign exchange, forex or fx market allows people and businesses to swap currencies
• The value of a currency depends on many factors, including the country’s economic prospects and interest rates
• Generally, the price of a company share goes up if more people think the company will do well and they decide to buy shares
• Market prices are affected by a number of factors, including the weather, natural disasters, wars, media reports and even rumours
• Markets can be exciting and unpredictable
• You can learn more about how the markets work and the risks involved, if you practice trading with play money, without risking your own cash

For detailed information on individual markets and a glossary of trading terms, visit the Resources section of the Learning Centre.