“Stock market” is a term used to describe the physical location where the buying and selling of stocks take place as well as the overall activity of the market within a particular country. The correct term to be used in pertaining to the physical location for trading stocks is “stock exchange.” Every country may have a couple of different stock exchanges that are usually traded on only one exchange although a lot of large corporations may be listed in several different locations.
The ubiquity of stock exchanges makes it possible to buy or sell stocks throughout the world. The only restriction to stock exchanges is time. Different exchanges may have differing opening hours based on their local times. The major stock exchanges in the world are the Tokyo Stock Exchange of Japan, the Bombay Stock Exchange of India, the London Stock Exchange of United Kingdom, the Frankfurt Stock Exchange of Germany, the SWX Swiss Exchange of Switzerland, the Shanghai Stock Exchange of China, and the New York Stock Exchange, the NASDAQ, and the AMEX of United States.
The economic health of a country is closely followed by stock markets. Bull markets occur when a particular nation experiences high economic production, low unemployment level, and low inflation rates. Bear markets, on the other hand, follow the down trends in the economy. Such indicators of economic downfall are increased unemployment and inflation. These causes the fall of stock prices.
Supply and demand, which are determined to a large extend by investor psychology, also influence the fluctuations in the prices of stocks. A rise in stocks may cause a lot of investors to jump into the bandwagon which later drives the price even faster. A falling price, on the other hand, can drive the same effect called short term fluctuations. After such runs, stock prices tend to normalize.
Aside from the stock exchange, other popular markets that offer many investment opportunities include the Foreign Exchange Market (FOREX), the Futures Market, and the Options Market. The FOREX is the biggest investment market in the world, in terms of trades and values. The traders in a FOREX buy one currency against another and profit from small changes in the value. Most FOREX trades are entered and exited in a 24-hour span so traders have to keep a close watch on the market in order to make profitable trades.
The futures market is a market of contracts where goods are bought and sold at specified prices and times. The desire of most buyers and sellers to lock in the prices of their goods for a future delivery despite the market conditions resulted to the existence of the futures market. The market conditions can make the actual futures contract to fluctuate considerably in value. Most of the investors in the futures market are mainly interested in the profit that can be realized in trading contracts and not in the actual goods.
Another alternative market is the options market. The options market is quite similar to the futures market because it also features a contract that gives the right, and not the obligation, to trade a stock at a certain price before the specified date. These can be traded on their own or purchased as an insurance against price fluctuations within a specified time frame.
The FOREX, the futures market, and the options market are all quite risky markets that require a considerable knowledge and experience to prevent any substantial loss. These also require a very close attention to the different market movements. As compared to the three, stocks are considered to be less risky because the movements of the market are usually gradual and although short term investment strategies are possible, a lot of people view stocks as long term investments.