First of all, what is an exchange? Initially, the exchange was the name for the premises where the trading of goods or securities took place, in the professional language called lots. Today, trading is carried out using computer technology, and special programs have come to be called exchanges. You can carry out the auction yourself, or you can use the services of an intermediary - a broker.
Various types of exchanges operate all over the world. They are classified according to the object of the auction. There are the following types of exchanges:
- currency;
- stock;
- commodity.
It is logical to assume that money is bought and sold on the currency exchange. Here floating exchange rates are formed. The activities of world currency exchanges have an impact on the economic situation in all countries. Securities are traded on stock exchanges. Looking at the results of trades for a certain period, we can talk about the position of certain large companies in the market. The Commodity Exchange is a huge market where they sell oil, grain, precious metals, coffee, cocoa, sugar, meat.
Types of activity of exchanges
If we describe the types of activity of exchanges, then we can say that they are all united by one goal - trading is carried out here. Exchange participants make a profit by trading. They can play to increase the price (long position) or to decrease it (short position). The players who profit from the price increase are called “bulls”. Those who are short are called "bears".
To understand the peculiarities of the exchange, you should gain experience in this area. But theoretical knowledge is also very important. They can be gleaned from specialized literature.
Main types of exchanges
You can study the main types of exchanges to understand the impact they have on the global economy. Each of us can even make money on the exchange by becoming a direct participant in it. Do not think that only large corporations are trading here.
Types of modern exchanges
All exchanges can be classified depending on the values that are used when performing exchange transactions. The types of modern exchanges are based on the types of values. The following values can act as objects of trade operations:
- Useful resources - gas, oil, ores;
- Securities and shares of various companies and banks;
- Bank checks and currencies of different countries;
- Products of everyday consumer demand - raw materials, food products;
- Information Technology;
- Electronic funds (cryptocurrency);
- Objects of intellectual property;
- Precious metals and precious stones (gold, diamonds, platinum);
- Cash liabilities (bonds).
Currency exchanges
On currency exchanges, operations are carried out for the free sale and purchase of currencies of various states on the basis of quotations - exchange rate ratios. The currency exchange belongs to the category of the most liquid exchanges. The ratio of exchange rates on the currency exchange (quotations) largely depends on the economic situation in the issuing countries and is a reflection of the purchasing power of currencies. At currency exchanges, the process of establishing the real market rate of a particular national and foreign currency takes place. All foreign exchange exchanges are legal entities and important elements of the foreign exchange market infrastructure.
Commodity exchanges
Commodity exchanges are markets that operate on a regular basis, where goods with certain characteristics are wholesaled. The principle of pure competition operates on the commodity exchange, and all goods are easily replaceable due to their homogeneity. At the moment, there are about 100 types of exchange commodities that belong to various groups - raw materials (energy or industrial), metals, textile raw materials, food products, etc. Depending on the goods being sold, commodity exchanges can be specialized (narrow product focus) or universal.
Stock exchanges
Securities are traded on stock exchanges, therefore they are the most important financial institution supporting the securities market. Stock exchanges provide a place for both the initial sale of securities and their subsequent resale. Due to trading on stock exchanges, there is a natural regulation of the securities market and ensuring the liquidity of financial investments. The listings of the largest stock exchanges are regularly updated based on their market capitalization. Both dealers and brokers can participate in trading on the stock exchange and make transactions.
Cryptocurrency exchanges
Cryptocurrency exchanges are electronic trading platforms where electronic money is exchanged for other electronic currencies or for state currencies of various countries. With the help of cryptocurrency exchanges, e-currency can be exchanged for real or a larger amount can be obtained in another e-currency. All cryptocurrency exchanges are divided into two main types:
- Exchanges where transactions are carried out exclusively in bitcoins and main forks;
- The exchanges on which transactions are also carried out between bitcoins and their forks and world national currencies.
Labor exchange
The labor exchange is a government intermediary structure between the hired labor force and employers. The labor exchange is a mechanism operating on the labor market and regulating certain of its processes. With the help of the labor exchange, the state exerts influence on the unemployment prevailing in the labor market and promotes the employment of persons who are temporarily unemployed. An important element in the activity of the exchange is the study of the demand for labor and its structure, as well as the analysis of the supply available on the market. Also, the functions of the labor exchange include keeping statistics and paying unemployment benefits.
Exchange psychology
Trading on the stock exchange requires certain psychology, the understanding of which is the key to successful operations in the stock market. The key to success on the stock exchange can be a combination of such qualities as the ability to tightly control your emotions and a clear understanding of the motivation for your actions. An experienced and successful broker is guided by a clear plan and sound analysis, which is suggested by stock market psychology. A destructive strategy in gambling on the stock exchange is the bet on greed, gambling excitement, and passion, as well as irrational expectations. Fear is also a dangerous emotion - it can both push you into rash deals and paralyze your actions.
Learn more about trading exchanges and how to work on them following our Financollege Courses.