How Financial Markets Work
Financial markets bring together participants who buy, sell or exchange approved financial products.
Market Participants
Individuals, companies, banks, institutions, market makers and other approved entities all take part, each with different goals and time horizons.
Buying And Selling
Buyers indicate the price they may be willing to pay, while sellers indicate the price they may accept. A trade happens where the two meet.
Supply And Demand
Prices tend to rise when demand is stronger than supply, and fall when selling pressure is stronger. Almost everything else that moves a market works through this mechanism.
Trading Hours
Market hours differ between products, venues, countries and time zones. Some markets close during holidays or scheduled interruptions.
Market Access
Access depends on the service, product, client eligibility, jurisdiction and approved market availability.
Prices, Liquidity and What May Move Markets
Prices & Liquidity
Market Prices
Prices change when new information becomes available, or when buying and selling activity shifts.
Bid and Ask Prices
The bid is generally the available selling price, and the ask is generally the available buying price. The difference between the two is commonly called the spread.
Liquidity
Liquidity describes how easily a transaction can be completed without causing a significant price movement. It's rarely constant; it changes with time and wider conditions.
Volatility
Volatility describes the size and speed of price changes. Higher volatility means larger and faster movements, in either direction.
Slippage
The final execution price can differ from the price shown when an order was submitted, particularly during volatile or less liquid conditions.
Execution & Spreads
Trading costs, spreads and execution rules apply to all transactions as set out in our published schedule.
Market prices, spreads, liquidity and execution can never be guaranteed.
What May Move Markets
Economic Information
Inflation, employment, economic growth and other published data can shift market expectations.
Interest Rates
Central bank decisions and changing interest rates can influence currencies, companies and investment values.
Political and Global Events
Elections, policy changes, conflicts and international developments can cause uncertainty or rapid movements.
Company or Sector Developments
Business results, industry changes and company news can affect the relevant investments.
Market Sentiment
Participant expectations, confidence and risk perception can influence buying and selling activity, sometimes independent of the underlying fundamentals.
Currency Movements
Exchange-rate changes can affect international transactions and portfolio values.
These factors explain why markets move. They cannot be used to predict market outcomes with certainty, and anyone who claims otherwise is selling something.
Using Market Information Responsibly
When reviewing market information, consider:
- The source and publication date
- Whether it is factual or an opinion
- The relevant market and time zone
- Whether prices are live or delayed
- Applicable spreads, commissions and charges
- Liquidity and execution limitations
- The possibility of financial loss
Market commentary and educational material, including everything on this page, should never be treated as a guarantee, a signal or a recommendation.