How do financial markets work?

Financial markets are where buyers and sellers of financial instruments trade in exchange for a price. These markets can be physical locations where trading takes place, such as stock exchanges, or they can be virtual platforms where trading occurs electronically.

The workings of financial markets are based on the principles of supply and demand. Buyers and sellers come together to exchange financial instruments, such as stocks, bonds, currencies, commodities, and derivatives. The price of these instruments is determined by market forces, such as the level of demand and supply, economic conditions, political events, and investor sentiment.

Financial markets serve multiple purposes, including providing companies with access to capital, allowing individuals to invest and save for the future, enabling investors to hedge risks, and facilitating global trade and investment. The functioning of financial markets is crucial for the growth and stability of economies around the world.