A market is a place where buyers and sellers trade assets. At the farmers market, buyers look for the best priced fruits, vegetables, and meats, controlling the farmers market demand, or how much (quantity) is desired by buyers. The higher the price, the less buyers are willing to pay; the lower the price, the more buyers are willing to pay. If a buyer can purchase 8 peaches for $4 (50 cents per peach), then buyers will buy lots of peaches. However, if a buyer can only get 2 peaches for $16 ($8 per peach), then buyers will buy fewer/no peaches.
Sellers control for what is offered at the market, or supply. The higher the price, the more the seller is willing to sell; the lower the price, the less the seller is willing to sell. If a seller can sell 8 peaches for $16, then the seller will try to sell lots of peaches. However, if a seller can sell $4 for 2 peaches, then the seller will sell fewer peaches. The seller would rather sell a higher quantity (8 peaches) at a higher price than a lower quantity (2 peaches) at that same price.
Similar to a farmers market, the financial markets are dependent on the laws of demand and supply. Buyers are looking to buy low and sellers are looking to sell high. The most common financial markets are:
In the next investment tip, I will discuss stocks. Reach out in the comments section or via email (TheLucesco@gmail.com) with any questions or thoughts.