What is a financial market?
A financial market is a place or system where participants buy, sell, or exchange financial assets. Markets help connect buyers and sellers and allow prices to change as supply, demand, and expectations change.
Different markets have different trading hours, costs, rules, liquidity, and risks. Understanding what you are trading is an important first step before considering any transaction.
Explore the major markets
Stock Markets
Stocks represent ownership shares in companies. Their prices can change in response to company performance, economic conditions, investor expectations, and market activity.
Examples: shares of publicly listed companies.Foreign Exchange (Forex)
The forex market involves exchanging one currency for another. Exchange rates can be influenced by interest rates, economic data, trade, and geopolitical events.
Example: the EUR/USD currency pair.Commodities
Commodities include raw materials and agricultural products. Prices may respond to supply, demand, weather, production costs, and global events.
Examples: gold, crude oil, and wheat.Market Indices
An index tracks the performance of a selected group of securities. You generally cannot buy an index directly, but certain funds and derivatives provide exposure to it.
Examples: S&P 500 and S&P/TSX Composite Index.Exchange-Traded Funds (ETFs)
ETFs are investment funds that trade on exchanges. They may hold a collection of assets or track an index, sector, commodity, or other market exposure.
Examples: broad-market index ETFs and bond ETFs.Bonds and Fixed-Income Markets
Bonds are loans made to governments or companies. They may pay interest over time, and their prices can change with interest rates, credit risk, and market conditions.
Examples: Government of Canada bonds and corporate bonds.What makes market prices move?
Prices can respond to company announcements, economic reports, interest-rate decisions, changes in supply and demand, and unexpected world events. Traders may interpret the same information differently, which can contribute to price fluctuations.
No single factor predicts every price movement. Markets can move unexpectedly, and past performance does not guarantee future results.
Understand risk before choosing a market
- Volatility: How much and how quickly prices can change.
- Liquidity: How easily an asset can usually be bought or sold without significantly affecting its price.
- Trading costs: Commissions, spreads, fees, and other expenses that may apply.
- Leverage: Borrowed or amplified exposure that can magnify both gains and losses.
Beginner tip
Learn one market at a time. Understand its rules, costs, and risks before moving on to more complex products or strategies.
What Is Trading?
Review the basics of buying and selling financial assets.