Economy
What you Should Know About Different Types of Financial Markets
Financial experts from CMC Markets share their insights into the types of financial markets and offer guidance on choosing where to trade when using derivatives such as spread bets and CFDs.
With the shockwaves of war, the pandemic, and a shifting political landscape rippling across the world, there has never been a more important time for traders to choose their markets wisely. Here, we will take a look at some expert insights on what to consider before trading.
What are the different financial markets?
There are many different types of financial markets that range from currencies to commodities and bonds. Each market then has specific subsets. For example, the commodity market is broken into Energy, Precious Metals, and Agricultural commodities.
What is the foreign exchange market?
Also known as the “forex market”, the foreign exchange market is the world’s largest and most active trading market. It is also the most liquid, which means it is the easiest to convert trades into real cash. While foreign exchange trading has long been dominated by large global banks and institutions, in recent years, it has become increasingly popular and accessible to individual traders.
Trading currencies is slightly different from trading other assets. Trading other assets usually involves trading in one market with profit and loss based on absolute returns (unless you are spread betting). For example, if you buy and the market goes up, you could make money. If you buy and it goes down, you could lose money.
However, foreign exchange trading is done using currency pairs, with one currency being traded against another. Profits and losses are measured by how one currency performs relative to another. For example, on a given day, the US dollar (USD) could appreciate relative to the euro but also decline relative to the Japanese yen. In the foreign exchange market, there are no absolute returns as there may be in other markets.
What is the commodity market?
In the commodity market, there are two main types of traders: hedgers and speculators.
Hedging is a strategy that involves opening multiple buy or sell positions at once to reduce the risk of loss and protect your portfolio from factors that are beyond your control.
A typical example of a hedger is a trader who wants to lock in a price for a product that they will then use at a future date, using futures or forward contracts. For example, farmers and agricultural companies may want to lock in a price for wheat for when they deliver it in September. This means that if the price of wheat falls between when it is sowed and when it is harvested, the hedgers are protected against any significant losses.
Speculators, on the other hand, look to profit from changes in prices as supply and demand conditions change. They have no intention of delivering or taking physical goods and instead try to predict (or speculate) which direction a particular market is headed and then trade from there. Spread betters and CFD traders can be classed as speculative traders, as they bet on the price movements of financial instruments rather than making a direct investment.
Commodities tend to fall into the following groups:
- Precious metals and base metals
- Energy commodities
- Agricultural commodities
What is the treasuries and bond market?
The treasuries and bond market is another active trading market that gives you the opportunity to trade off wider economic trends across different countries.
Governments across the world issue bonds or gilts to individual investors, businesses, banks, and even other countries. A bond can be thought of as a share in the government – you lend them money for government spending and then they repay you with interest at a later date.
Governments sell bonds at different prices and with different rates of interest depending on the economic conditions at the time. Once a bond has been issued, it usually has a fixed rate of interest.
As well as interest payments, government bonds often also pay off with a lottery-style reward system that is drawn every month. Bond investors can receive tax-free cash prizes of up to £1,000,000 if their name is selected from the pool.
What is the stock market?
Stock market trading is what people usually think of when they think of financial markets and investments. The sale of shares from a company’s treasury to shareholders is known as the primary market.
With stock market trading, companies sell shares with the intention of raising further money and capital to expand their business. Traders may buy the shares with the expectation that the value of the company’s shares will rise; however, with derivative trading products such as spread bets and CFDs, you can also open short positions or sell the instrument if you expect the price of the stock to fall, which can lead to equal profits.
What are stock market indices?
Global market indices are the benchmark measure used to evaluate the strength or weakness of a particular region or country’s market performance.
A market index evaluates the performance of the top companies by market capitalisation or share price in a country. This is then used as a barometer for the market performance of a whole country and even to evaluate the impact of wider macroeconomic trends that can be seen in indices across the world.
Different indices are comprised of a different number of companies depending on the country. For example, the FTSE 100 evaluates the performance of the top 100 companies in the UK, whereas the Dow Jones 30 looks at the top 30 companies in the US.
Some of the best-known global market indices include:
- FTSE 100 (UK)
- Dow Jones 30 (US)
- Hang Seng (Hong Kong)
- DAX (Germany)
- CAC 40 (France)
- IBEX 35 (Spain)
- OMXS30 (Sweden)
- FTSE MIB (Italy)
How to choose which markets to trade
Understanding financial markets and deciding which ones to trade is, undeniably, complicated. However, there are a few different factors you should consider that can help to simplify the process, along with risk-management protocols.
For example, most traders begin their journey by trading in a market that they are familiar with before they look to branch out to international markets or assets that they are less familiar with.
Then, once you have started trading in a familiar market, you can try taking small steps into a similar area. For example, you might choose to expand trading from individual shares to stock indices or from resource shares to related commodities.
You should also keep your eye on both wider, macroeconomic trends (such as war or fuel supplies) and smaller shifts that are only taking place in a handful of niche markets. Balancing the small picture with the big picture is a key skill for any budding investor and spotting the relationship between small trends and big trends can lead to very smart trades.
Derivative trading comes with a number of risks, such as volatility within the financial markets and the potential of capital loss, so it is important you also consider how to combat these. For example, traders often place tools such as stop-loss and take-profit orders on positions after considering how much they are willing or able to lose. Even markets that some traders consider relatively safe, such as the bond market, can present opportunities for losses, so it’s important to always be prepared.
By Adedapo Adesanya
The World Bank has approved a $500 million facility for Nigeria to expand longer-term lending to small and medium sized businesses.
Approved under the Fostering Inclusive Finance for MSMEs in Nigeria (FINCLUDE) project, the package comprises a $400 million International Bank for Reconstruction and Development (IBRD) loan and a $100 million International Development Association (IDA) credit. Both IBRD and IDA are members of the World Bank Group.
The scheme will be implemented by the Development Bank of Nigeria (DBN), with credit guarantees provided through DBN’s subsidiary, Impact Credit Guarantee Limited (ICGL).
FINCLUDE is designed to address constraints faced by micro, small, and medium enterprises (MSMEs) in Nigeria which despite accounting for most businesses and nearly half of gross domestic product (GDP) face long-standing barriers to formal finance.
Fewer than one in 20 MSMEs have access to bank credit; loans are often short-term and costly; and collateral requirements exclude many viable firms. Women-led enterprises, which make up a substantial portion of MSMEs, are disproportionately affected, facing higher rejection rates and limited tailored products. Agribusinesses, central to food security and rural livelihoods, similarly struggle to obtain more extended‑tenor financing for equipment, processing, storage, and logistics.
However, FINCLUDE seeks to address these constraints by expanding access to affordable, longer-term finance and tailored solutions for segments with the most significant development impact.
Speaking on this, the World Bank Country Director for Nigeria, Mr Mathew Verghis, said, “FINCLUDE is about jobs, opportunity, and inclusion. By expanding access to finance for viable MSMEs—particularly women-led firms and agribusinesses—Nigeria can accelerate growth and deliver tangible benefits across communities nationwide.
“The project will make it easier for deserving small businesses to get the finance they need to grow and hire workers. With better support for lenders that practice inclusive finance and fairer, longer-term loans for entrepreneurs, we are backing the people who power Nigeria’s economy—especially women and those in agriculture.”
The FINCLUDE project will help to mobilise private investment and expand access to and usage of inclusive, innovative financial products for MSMEs nationwide.
Through DBN, the operation will strengthen the capacity of banks, including microfinance banks and non-bank financial institutions such as financial technologies (fintechs), to provide larger loans with more reasonable repayment periods, and—through ICGL—will scale partial credit guarantees so that lenders can extend credit to businesses they might otherwise consider too risky.
Targeted technical assistance will modernise loan appraisal by leveraging AI-enabled digital platforms to accelerate decision-making, improve data quality, strengthen impact measurement, and build capacity for both MSMEs and participating financial institutions.
According to the World Bank, a strong emphasis on inclusion will ensure that women-led businesses and agribusinesses benefit from these improvements.
Also commenting, Task Team Leader for FINCLUDE, Mrs Hadija Kamayo, said, “FINCLUDE will help to mobilize approximately $1.89 billion in private capital, expand debt financing to 250,000 MSMEs—including at least 150,000 women-led businesses and 100,000 agribusinesses—and issue up to $800 million in guarantees to catalyse lending.
“By extending the average maturity of MSME loans to about three years, it will help firms invest in equipment, factories, staff, and productivity, translating finance into jobs and growth.”
By Dipo Olowookere
The local stock market firmed up by 1.13 per cent on Friday as appetite for Nigerian stocks remained strong.
Investors reacted well to the 2026 budget presentation of President Bola Tinubu to the National Assembly yesterday, especially because of the more realistic crude oil benchmark of $64 per barrel compared with the ambitious $75 per barrel for 2025. This year, prices have been between $60 and $65 per barrel.
Business Post observed profit-taking in the commodity and energy sectors as they respectively shed 0.14 per cent and 0.03 per cent.
But, bargain-hunting in the others sustained the positive run, with the consumer goods index up by 3.82 per cent.
Further, the industrial goods space appreciated by 1.46 per cent, the banking counter improved by 0.08 per cent, and the insurance industry gained 0.04 per cent.
As a result, the All-Share Index (ASI) increased by 1,694.33 points to 152,057.38 points from 150,363.05 points and the market capitalisation chalked up N1.080 trillion to finish at N96.937 trillion compared with Thursday’s closing value of N95.857 trillion.
A total of 34 shares ended on the advancers’ chart, while 24 were on the laggards’ log, representing a positive market breadth index and bullish investor sentiment.
Austin Laz gained 10.00 per cent to close at N2.42, Union Dicon also jumped 10.00 per cent to N6.60, Tantalizers increased by 9.80 per cent to N2.69, Aluminium Extrusion improved by 9.78 per cent to N12.35, and Champion Breweries grew by 9.71 per cent to N16.95.
Conversely, Sovereign Trust Insurance dipped by 7.42 per cent to N3.87, Royal Exchange lost 6.84 per cent to trade at N1.77, Omatek slipped by 6.84 per cent to N1.09, Eunisell depreciated by 5.88 per cent to N80.00, and Eterna dropped 5.63 per cent to close at N28.50.
Yesterday, traders transacted 1.5 billion units worth N21.8 billion in 25,667 deals compared with the 839.8 million units sold for N32.8 billion in 23,211 deals in the preceding session, showing a surge in the trading volume by 76.61 per cent, an uptick in the number of deals by 10.58 per cent, and a shrink in the trading value by 33.54 per cent.
By Adedapo Adesanya
Three stocks stretched the bearish run of the NASD Over-the-Counter (OTC) Securities Exchange by 1.21 per cent on Friday, December 19, with the market capitalisation giving up N26.01 billion to close at N2.121 billion compared with the N2.147 trillion it ended a day earlier, and the NASD Unlisted Security Index (NSI) dropping 43.47 points to 3,546.41 points from 3,589.88 points.
The trio of FrieslandCampina Wamco Nigeria Plc, Central Securities Clearing System (CSCS) Plc, and NASD Plc overpowered the gains printed by four other securities.
FrieslandCampina Wamco Nigeria Plc lost N6.00 to sell at N54.00 per unit versus N60.00 per unit, NASD Plc shrank by N3.50 to N58.50 per share from N55.00 per share, and CSCS Plc depleted by N2.91 to N33.87 per unit from N36.78 per unit.
On the flip side, Air Liquide Plc gained N1.01 to close at N13.00 per share versus N11.99 per share, Golden Capital Plc appreciated by 70 Kobo to N7.68 per unit from N6.98 per unit, Geo-Fluids Plc added 39 Kobo to sell at N5.50 per share versus N5.11 per share, and IPWA Plc rose by 8 Kobo to 85 Kobo per unit from 77 Kobo per unit.
During the trading day, market participants traded 1.9 million securities versus the previous day’s 30.5 million securities showing a decline of 49.3 per cent. The value of trades went down by 64.3 per cent to N80.3 million from N225.1 million, but the number of deals jumped by 32.1 per cent to 37 deals from 28 deals.
Infrastructure Credit Guarantee Company (InfraCredit) Plc finished the session as the most active stock by value on a year-to-date basis with 5.8 billion units valued at N16.4 billion, followed by Okitipupa Plc with 178.9 million units transacted for N9.5 billion, and MRS Oil Plc with 36.1 million units traded for N4.9 billion.
The most active stock by volume on a year-to-date basis was still InfraCredit Plc with 5.8 billion units worth N16.4 billion, trailed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.7 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.
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