Exchanges

We’ve had a quick look into the main indices and to be honest you don’t really need to know the complete ins and outs of them, so I don’t want to chat about them in too much detail. These Modules are about making money using a tried and tested system that I have used over the years, not about the history of the money markets.

However, having said, that I would like to talk to you about the main Exchanges in the world. This complements your knowledge of the indices that we covered previously. Even though I don’t want to burden you with too much detail about the indices and exchanges, it is important that you are aware of who, what and where they are. We need to cover the basics before I can go into teaching you my techniques.

What are Exchanges?

Well I think the clue is in the name! Exchanges are world financial centers devoted to the exchange (buying and selling) of financial products, commodities etc. There are various key market exchanges that specialise in differing sectors of global exchange, commodities, metals etc. I aim to show you the main ones that are out there. One important point I want to get across to you, is that you WILL NOT be dealing with these guys at all, but their opening times etc. do have a relevance to your trading activity.

Stock Exchanges used to be an ‘open house’ for anyone wishing to trade. It soon became apparent that some kind of order was required to stabilise trades and agreements. From that moment the Stock Exchanges became ‘club’ like and very cliquey, so from the early days from being a public place to trade, it soon became a closed network of traders who had to be members of that exchange.

There are many stock exchanges around the world and much like the main indices we talked about before, they centre on the world’s largest markets. So for London we have the London Stock Exchange (LSE), in New York we have the New York Stock Exchange (NYSE) and finally the Tokyo Stock Exchange in…. yep you guessed it Tokyo. See told you it’s not that difficult. Strange as it may seem but the largest in terms of capitalization (money that is invested in a business or the value of a company’s stocks and bonds) is Tokyo, but because of their strict rules and laws of trading and high fees they lag behind NYSE and LSE who are way ahead in terms of number of trades made etc.

Smaller exchanges also exist that deal with the exchange of money from differing countries – these are Foreign Exchanges, also known as the FOREX. There are also various metal exchanges that deal in the sale of metals (Gold, Copper, Platinum) etc. for instance there is the London Metal Exchange in the UK.

As you can see, there are a broad and varied number of exchanges across the globe. Now before you start to panic. I must point out again, that you will not be dealing with these guys at all. However, it is important that you know where they are and what they do as a whole.

Why worry about another exchange in another country?

One of the great things about financial spread betting is that you can trade in anything and I really do mean pretty much anything, but more about that later when I talk in depth about financial spread betting. The point I am making is, that as you can trade Indices it helps to know where they are located, else you wouldn’t know when that market opens so you can begin trading in that Indices. One of the wonderful things about being able to trade in all of the major and minor indices (CAC, DAX) is that you can trade 24 hours a day if you so wished.

Which is handy if you are working and want to get your hands dirty with some intraday trading (trades opened and closed within hours). Although I hasten to add that I wouldn’t recommend intraday trading to begin with, but as ever I shall be talking about the merits of them all, when we are actually teaching you about the techniques etc.

I would put up a list of the opening times of all the exchanges but the main exchanges open from 8am to 4.30pm local time. Trading in metals is one of the funny ones as far as trading. As they only trade at specific times of the day, usually for periods of 10 minutes or so – yes that small. To be honest you don’t have to worry about that too much, although you tend to get better prices when they’re being traded. Of course you can trade outside of these times, you will get better prices however, when you trade when that particular market is open – lower spread on trades.

So there we have it. Not rocket science. The exchanges are mostly electronic now and allow quick trading. The NYSE still has a trading pit where you can see traders going nuts and exchanging prices and trades using their own sign language, similar to that used by ‘Bookies’ tic tac at the race tracks. This increased speed in trading, means that prices fluctuate considerably during the day and when you see a live chart of a company share, commodity etc. you will see how even just over periods of minutes there is a degree of positive and negative, where traders are making their decisions on the fever of the trading floor and the psychology of the market. This is where your banks, major corporations, key financiers make their everyday money. The market makers, fund managers and pit traders get paid thousands of pounds to do this too. Does make you think doesn’t it!

We’ve covered the main parts in this early stage. We now know what a chart is and what it consists of and how it is read in its basic form. We have discussed the major indices, how and what they are and what effect the differing sectors within each indices can have. Finally we have just looked into the main exchanges across the globe. This gives you an idea of the trading world at large. Next we can look at what Financial Spread Betting really is and how to best use the techniques.

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