The common perception of the greater majority about the financial markets is that it is an arena intended exclusively to the intellectually sophisticated people such as economists, financial analysts, fund managers and the likes. Should one be equipped with high standards of education - college, graduate studies or doctorate degree holder?

Stock (Equities) Market - you earn money by trading (buy and sell) stocks or shares (ownership) of a corporation

Currency Market - you earn money by trading (buy and sell) currencies of different countries

Commodities Market - you earn money by trading (buy and sell) basic commodities like oil, precious metals - gold/copper/nickel, coffee, etc.

What's the common denominator among all these markets? Simply put, you are making a living through trading as a medium. Take buying and selling of the coffee bean commodity or what about oil for instance? Currency markets have their own mediums such as dollars, euros, yen, etc. Trading financial markets is like the manner of conducting a business. It goes with the same principle of buying and selling, and products would naturally differ from one market to the other.

The financial market in our fast growing global economy is a huge industry. It is the money of all money, business of all business, participated from large institutions down to the private individual. Each economy has its own capital markets and one is not limited to trading in his/her own motherland. Investors or traders can tap foreign markets to trade as well. The U.S. stock market has their NYSE (New York Stock Exchange), Canada has the TSX (Toronto Stock Exchange), Japan has their Nikkei, and the list goes on.

An exchange is a place where buyers meet sellers and vice versa to transact or trade. Due to the sophistication in information technology driven by the birth of the internet, traders from anywhere in the world can deal with ease through the use of online brokerage firms.

Brokerage firms or brokers, represent individuals or entities that executes transactions. A trader has to be duly represented by a qualified and authorized brokerage firm of an exchange. Here is how a transaction is made: Lets say a trader gives instructions to a broker to buy X amount of shares of the stock of company ABC for the price of Y. The broker then goes to the exchange and matches the price Y with sellers of the same stocks offering at the price of Y. Once the transaction is closed, the buyer then pays for the shares, gives a commission to the broker and settles the tax dues. On the other hand, the seller gets his money and pays a commission and tax dues on his end. Although the jargon changes from each market to the other, the example stated is pretty much how all markets work.

Brokerage firms have their own specialization. Stock brokers deal specifically on stocks. Foreign currency brokers deal specifically on the trade of currencies. Thus, the selection of brokerage depends on the type of financial instrument that is to be traded.

The choice of financial market is a matter of preference. Some prefer the liquidity (cash volume and market size) of currency trading. The currency market is the largest and most liquid among its counterparts in the capital markets. It is robust and the price movement is extremely fast. Some would prefer the stock market being corporate driven in nature. Investors tend to feel proud with the belief that the shares of the corporations they bought would perform in value over time. Others like the thrill of speculative news and rumors of the many companies listed in the market, it makes them feel involved and informed giving them the aura of being highly sophisticated.

For new comers to the financial market scene, the stock market is the most ideal for them to try. This is because the stock market is a very popular market. It is easy to understand and get into as well. We will concentrate on discussions about trading stock markets on part 2 of this series.

(to be continued..)