The structure of the financial market and its functions

Trader's keystones or all in due time

If someone tells you that understanding the "financial market" term, its structure and functions is essential to every trader, don't believe them.  That's not right. However, we cannot say that this information is unnecessary.  In the beginning we don't study an A to Z of Forex. We endeavour to acquire necessary skills independently. Only when we've accumulated some experience by trial and error, we turn ourselves to general knowledge. It may be a webinar, a trading course, educational articles or A to Z books about Forex. According to the level of our expertise, we choose this or that kind of information. If a novice benefits from reading about 2 types of market analysis - fundamental and technical, - a more experienced trader will be interested in learning about the underpinnings of the underpinnings, that huge thing the currency market - his/her work place - is a part of. As they say, all in due time.

The structure of the financial market 

All the national and international markets make up the financial market. It incorporates banks, pension/insurance/currency funds and many other economic institutions that help accumulate and redistribute money. 

Being a complex system, the financial market has a multilevel structure including 5 market segments: currency market, credit market, insurance market, investment market, and securities market. So, the Forex market only accounts for one fifth of the financial market. 

Functions of the financial market

The financial market plays an important role in our modern civilized society. It aims to mobilize capital, distribute it between industries, control and maintain reproduction process and improve the efficiency of the economic system in general. The activities of the financial market are based on national banks' liabilities to control currency rates and set interest rates. Stock and currency markets as well as commercial banks are directly connected with the development of the financial assets market. The securities market is the most interesting segment of the financial market in terms of investment profitability.

Important indicators of the financial market

For efficient trading and a perfect grasp of Forex affairs, a trader needs to know the indicators that help assess the situation in the financial market. These indicators include periodic releases of macro- and microeconomic data on the market state intended for more accurate forecasts and productive analysis.  GDP, unemployment and inflation levels, currency or securities growth or fall rates also belong to those indicators. As a rule, experienced traders actively use economic calendars freely provided by brokers. I recommend you take up this habit, if you haven't yet. If you wish to learn more about this tool and how to operate it correctly, you can always consult one of my articles

That's all for now. 

See you later, friends!

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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