Financial markets serve a lot of purposes in our day to day lives even if you don’t know it. The truth of the matter is that most people are usually ignorant of how the world works. As long as their little worlds are working fine, they have no interest in what is beyond their current level of understanding and that is often a problem. However, if you have ever thought of picking up day trading as a full-time job, then you will have to accept that ignorance is not the best dose in life and start learning how the world actually works. In this article, I will be looking at some of the functions that are performed by financial markets. Financial markets have a lot of influence on many aspects in the financial world and I am here to exploit them.

Price Determination

The first function that is performed by financial markets that we will be looking at is the determination of price. Financial markets determine the prices of financial assets and commodities among other assets through their supply and demand. The funds are supplied by the investors while industries which are composed of companies are in need of those finances. As such, when these two stakeholders interact, prices of assets are set and that introduces order in the market.

Besides the determination of prices, financial markets are also fundamental in the mobilization of savings. In order to understand how this happens, you need to start by understanding that success in any economy can only be achieved by the money that people have not sitting idle. That money needs to be put to work in order to create value in the said economy. As such, financial markets are very important in that they connect people who have money with those who need it for the purposes of creating value and building the economy.

Ensures liquidity

All the assets that you see being traded on financial markets have a very high level of liquidity. High liquidity means that investors who invest in the said financial assets are able to trade the assets and convert them into liquid cash any time they want without any inconveniences. This is one of the major reasons why investors take part in trading their assets on financial markets such as They want to invest their money so that they can make a profit while being able to pull the money out of the market with ease whenever they need it.

Saves time and money

Lastly, financial markets offer a good platform for sellers and buyers to meet easily without having to waste a lot of time or money. Without the financial markets, it would be a nightmare for buyers and sellers to meet each other. With financial markets, sellers meet buyers and vice versa without the two even having to know each other individually or any in any other manner. All you have to know is that you have an asset that you need to sell and that there is someone who is willing to buy it at the said price without asking questions. Thus, you meet online without actually meeting and conclude the transaction.