What is the financial market?
Any person who wishes to increase their capital will inevitably face the concept of the financial market. Securities are the most popular way of money investing, since they provide multiple profits and appear as a highly tradable product which can be quickly bought and sold, which is impossible with fixed assets, for example.
The key word here is the market. Once it is the market, there must be are sellers that offer a product and customers who buy this product. At the stock market, this product is securities. The stock market is another name for the securities market.
Securities are shares, bonds, warrants, notes, options, futures, shares (stocks).
The stock market is a mechanism for transfer of funds from one economic sector to another. It may be represented by the following example: there is a company that produces a specific product, and it has no money for continued manufacture. To get the money the company put its securities to the market. Another company, with possesses the necessary amount of money, buys these securities. This results distribution of capital between the enterprises and industries.
Why traders follow financial news?
Economic and financial news have a direct impact on the stock market, so traders should monitor them constantly. As they say, who owns the information, he owns the world. Different information affect the market in different ways. The share price may go up sharply because of good quarterly income reports, and may significantly drop because of the hurricane that destroyed the company’s production assets. That is why you should follow stock market news, if you do not want to wake up one “fine” morning and see that your profitable position became tragically losing after some important information appeared at the market.
Financial news are important because they:
1. Inform the market. In other words, good news boost increased demand for the share, and the bad news increase offer. It is believed that all the significant short-term fluctuations at the market happen purely because of the news.
2. Create volatility. We will not be able to make a profit if the price is stable. The news at the market, different from the expectations of stock gamblers, create stirring and therefore volatility.
3. Limit the risk. Most of the stock news are scheduled so you know when fresh information will come out, what it will be about, and what its impact on the market will be. Thus, one can prepare for it and, if necessary, limit their risks.