Supply and Demand is a fundamental concept in economics that describes how prices and quantities of goods and services are determined in a market.
Demand
Definition: Demand is the quantity of a product or service that consumers are willing and able to buy at different prices over a certain period.
Law of Demand: There is an inverse relationship between price and quantity demanded — as price decreases, demand usually increases, and vice versa.
Demand Curve: A downward-sloping curve that shows the relationship between price and quantity demanded.
Supply
Definition: Supply is the quantity of a product or service that producers are willing and able to offer for sale at different prices over a certain period.
Law of Supply: There is a direct relationship between price and quantity supplied — as price increases, supply usually increases, and vice versa.
Supply Curve: An upward-sloping curve showing the relationship between price and quantity supplied.
Factors Affecting Supply and Demand
Factors Affecting Demand
Consumer income
Preferences and tastes
Prices of related goods (substitutes and complements)
Expectations about future prices
Number of buyers
Factors Affecting Supply
Production costs
Technology
Prices of related goods
Expectations about future prices
Number of sellers
Importance of Supply and Demand
Helps explain how prices are set in competitive markets
Provides insights into how changes in market conditions affect prices and quantities
Forms the basis for economic policy and business strategy decisions
Economics is the social science that studies how individuals, businesses, governments, and societies make choices about allocating scarce resources to satisfy their unlimited wants and needs.
Purpose of Economics
To understand and predict economic behavior.
To develop policies that improve economic welfare.
To allocate resources efficiently.
Basic Concepts in Economics
Main Fields of Economics
Microeconomics Studies the behavior of individuals, households, and firms and how they make decisions in specific markets.
Macroeconomics Studies the overall economy, including economic growth, unemployment, inflation, monetary and fiscal policies.
Types of economies describe how a society organizes production, distribution, and consumption of goods and services—specifically, who makes economic decisions and how resources are allocated.
Key takeaway
Most modern economies are mixed economies, combining market efficiency with government regulation to promote stability and social welfare.
A CFD (Contract for Difference) is a derivative financial instrument where two parties (a trader and a broker) agree to exchange the difference in the price of an asset between the time the position is opened and closed.
You do NOT own the underlying asset (stock, gold, index, etc.).
You are only trading price movements.
How CFD trading works (step by step)
Long vs Short (very important)
🔼 Going Long
You profit when the price increases.
Example:
Buy at 100
Sell at 110
Profit = +10
🔽 Going Short
You profit when the price decreases.
Example:
Sell at 100
Buy back at 90
Profit = +10
⚠️ This ability to profit in falling markets is a key feature of CFDs.
Leverage explained in depth
Leverage allows you to control a large position with a small amount of capital.
Leverage
Margin Required
1:10
10%
1:50
2%
1:100
1%
1:500
0.2%
⚠️ Risk of leverage
A 1% price move with 1:100 leverage = 100% gain or loss
Losses can exceed expectations if risk is unmanaged
Costs in CFD trading
1️⃣ Spread
Difference between Bid and Ask
Paid when opening a trade
2️⃣ Commission
Some brokers charge commission (usually on stocks)
3️⃣ Overnight / Swap fee
Charged if you hold a position overnight
Based on interest rate differentials
CFD vs owning the asset
Markets available via CFDs
CFDs allow access to global markets from one account:
Forex – currencies
Commodities – gold, oil, silver
Indices – Nasdaq, Dow Jones
Stocks – global equities
Cryptocurrencies – price exposure only
Are CFDs regulated?
CFDs are legal and regulated in many jurisdictions
Regulation depends on the broker’s license (FCA, ASIC, CySEC, etc.)
A centralized market is a market in which buying and selling activities take place at a single central location or through a central system. All transactions are processed and supervised by a central authority or platform.
Key characteristics
Operated and regulated by a central authority
Transparent and publicly quoted prices
High liquidity due to the concentration of buyers and sellers
Systemic risk if the central platform fails or is disrupted
Decentralized Market
A decentralized market is a market without a single central authority, where buyers and sellers trade directly with each other through a network or bilateral agreements.
Risk management is the process of identifying, assessing, and controlling threats or risks that could negatively impact an individual, organization, or project. The goal is to minimize the potential losses or harm by planning how to handle uncertainties effectively.
In finance or trading, for example, risk management involves strategies to limit potential losses—such as setting stop-loss orders, diversifying investments, or controlling position sizes—so that even if the market moves unfavorably, the damage is limited.
Risk management is crucial for capital preservation and achieving long-term objectives. Even the top global financial institutions prioritize it above all else.
Market sessions refer to the specific time periods during which major global financial markets are open. Because financial markets operate across different time zones, trading activity follows a continuous cycle, with varying levels of liquidity and volatility throughout the day.
Key Takeaway
Trading activity is not evenly distributed throughout the day. Understanding market sessions helps traders choose the right time to trade, manage risk, and optimize performance.
Leverage is the use of borrowed resources (money or financial instruments) to increase exposure to an investment or activity, aiming to amplify potential returns.
Leverage = controlling a larger position with a smaller amount of your own capital
How it works
When a company or investor uses debt instead of only their own capital:
If returns are higher than the cost of debt, leverage amplifies profits
If returns are lower than the cost of debt, leverage amplifies losses
Behavioural Finance is a field of study that combines psychology and finance to understand how emotions, cognitive biases, and social factors influence investors’ decisions and financial markets.
Key Points:
Unlike traditional finance, which assumes investors are fully rational, behavioural finance acknowledges that people often make irrational decisions.
It studies common biases such as overconfidence, herding behavior, loss aversion, and confirmation bias.
These biases can lead to market anomalies like bubbles, crashes, and mispricing of assets.
Understanding behavioural finance helps investors and financial professionals recognize and mitigate emotional and cognitive errors in decision-making.
Impacts on Financial Markets
Market bubbles and crashes often result from collective irrational behaviour driven by biases.
Asset prices may deviate from their true value because of emotional trading.
Investors’ decisions are influenced by mood, social pressures, and cognitive shortcuts rather than purely rational analysis.
Practical Applications
Investment Strategies: Incorporating behavioural insights to improve decision-making and portfolio management.
Risk Management: Recognizing biases helps in avoiding excessive risk-taking or panic selling.
Financial Education: Teaching investors about common biases to foster better habits.
Market Regulation: Regulators use behavioural finance to design policies protecting investors.
Summary
Behavioural Finance bridges the gap between psychology and economics, explaining why markets are not always efficient and why investor behaviour often deviates from rational models. Understanding these concepts can lead to smarter investing and better financial outcomes.
The Evolution of Technical Analysis reflects how market analysis has developed over time, from simple price observations to sophisticated data-driven models used in modern trading.
Technical analysis has evolved from visual chart reading to advanced, technology-driven systems, remaining a vital tool for understanding market behavior and timing trades.
“Without a solid foundation and fundamental knowledge, it is difficult to achieve profits or build wealth. Successful individuals and companies never rely solely on technical knowledge to grow their wealth—they combine it with strong fundamentals and a clear vision for long-term growth.“
The International Financial System (IFS) is the global framework that enables the flow of money, capital, and financial services across countries. It connects national financial systems and facilitates international trade, investment, and economic cooperation. The international financial system consists of institutions, markets, rules, and instruments that allow governments, businesses, and individuals to conduct cross-border financial transactions efficiently and securely.
Functions of the International Financial System
Facilitates international trade and investment
Enables global capital allocation
Supports economic growth and development
Promotes financial stability and risk management
Provides mechanisms for crisis prevention and resolution
A well-functioning international financial system helps reduce uncertainty, manage global financial risks, and support sustainable economic growth worldwide.
Portfolio Management is the process of selecting, managing, and monitoring a collection of investments (a portfolio) to achieve specific financial goals while balancing risk and return. Portfolio management involves deciding what to invest in, how much to invest, and when to adjust investments based on an investor’s objectives, risk tolerance, time horizon, and market conditions.
Main Components of Portfolio Management
Asset Allocation Distributing investments among different asset classes such as stocks, bonds, commodities, cash, or alternative assets to manage risk.
Investment Selection Choosing specific securities or instruments within each asset class.
Risk Management Identifying, measuring, and controlling risks through diversification and other strategies.
Performance Monitoring Tracking portfolio performance against benchmarks and investment objectives.
Rebalancing Periodically adjusting the portfolio to maintain the desired asset allocation.
Types of Portfolio Management
Active Portfolio Management: Managers actively buy and sell assets to outperform the market.
Passive Portfolio Management: Focuses on matching market performance, often through index funds.
Discretionary Portfolio Management: Managers make decisions on behalf of clients.
Non-discretionary Portfolio Management: Managers provide advice, but final decisions are made by clients.
The main goal of portfolio management is to maximize returns for a given level of risk or minimize risk for a desired level of return.
Derivative securities are financial instruments whose value is derived from the value of an underlying asset, index, or rate. Common underlying assets include stocks, bonds, commodities, currencies, interest rates, or market indexes. Derivatives are primarily used for hedging risk, speculation, or arbitrage.
Main Types of Derivative Securities
Futures Contracts Standardized agreements traded on exchanges, obligating the parties to buy or sell an asset at a predetermined price on a specified future date.
Options Contracts granting the holder the right, but not the obligation, to purchase (call option) or sell (put option) an asset at a specified price within a defined time period.
Swaps Customized, over-the-counter agreements between parties to exchange cash flows or financial instruments, commonly used to manage interest rate or currency risks.
Forwards Private, non-standardized contracts between two parties to buy or sell an asset at an agreed price on a future date, typically traded over-the-counter.
Markets for Trading Derivative Securities
Exchange-Traded Market (ETM): This is where standardized derivative contracts are traded on formal exchanges such as the Chicago Mercantile Exchange (CME), NYSE, or Vietnam’s Commodity Exchange (MXV).
Over-The-Counter (OTC) Market This market involves direct trading between parties without going through formal exchanges. Contracts are often customized according to the agreements between the parties.
Liquidity Providers are entities or institutions that supply the market with liquidity, meaning they make it easier to buy or sell assets without causing significant price changes. They ensure there’s enough volume of assets available so trades can happen smoothly and quickly.
More details:
In financial markets (like stocks, forex, or cryptocurrencies), liquidity providers often include banks, market makers, or large financial firms.
They place buy and sell orders on exchanges or trading platforms to maintain active markets.
By doing so, they reduce the bid-ask spread, which is the difference between the buying price and selling price, making trading more efficient and less costly.
For example, in forex trading, liquidity providers are usually big banks or financial institutions that offer currency prices to brokers and traders.
Financial companies without liquidity providers become scammers by using large price fluctuations to cause clients to incur losses.
The Central Bank plays a critical role in a country’s financial and economic system. It is the main authority responsible for regulating and supervising the banking sector, implementing monetary policy, and maintaining financial stability. The Central Bank controls the money supply and interest rates to achieve economic goals such as controlling inflation, supporting employment, and fostering sustainable economic growth. Additionally, it acts as a lender of last resort to financial institutions in times of crisis, manages the country’s foreign reserves, and oversees the issuance of the national currency. Through these functions, the Central Bank helps ensure confidence in the financial system and promotes the overall health of the economy.
Main Functions of the Central Bank
Monetary Policy Implementation Regulates money supply and interest rates to control inflation, stabilize exchange rates, and promote economic growth.
Currency Issuance Sole authority to issue and manage the national currency in circulation.
Lender of Last Resort Provides emergency liquidity support to financial institutions facing difficulties to maintain system stability.
Bank Regulation and Supervision Ensures the safe and sound operation of commercial banks and financial organizations.
Maintaining Financial Stability Prevents and manages systemic risks to protect the stability of financial markets.
Foreign Exchange Reserve Management Holds and manages foreign currency reserves and intervenes in the forex market when necessary.
Government’s Banker Manages government financial transactions, public debt issuance, and administration.
Credit Control Coordinates credit volume and capital costs to foster balanced economic development.
A Financial Services License is a certification issued by the financial regulatory authority that allows an organization or individual to legally provide financial services such as investment advice, securities brokerage, fund management, insurance, lending, and other related financial services.
In each country, this license is issued by the corresponding financial regulator, for example:
United States: Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA)
United Kingdom: Financial Conduct Authority (FCA)
Australia: Australian Securities and Investments Commission (ASIC)
Canada: Canadian Securities Administrators (CSA) and provincial regulators such as the Ontario Securities Commission (OSC)
Singapore: Monetary Authority of Singapore (MAS)
Hong Kong: Securities and Futures Commission (SFC)
European Union: National competent authorities in each member state, coordinated under the European Securities and Markets Authority (ESMA)
Scope of Activities The license clearly defines the scope of permitted services, such as investment advice, securities brokerage, fund management, insurance, consumer lending, financial payment services, etc.
Financial capacity and qualified professional personnel as required
Risk management policies, compliance with laws and anti-money laundering regulations
Internal procedures, reporting systems, and activity monitoring
Compliance Responsibilities License holders must strictly comply with regulations, including:
Undergoing audits and inspections when required
Periodic reporting of financial activities
Compliance with risk management and customer protection regulations
Therefore, any enterprise that conducts marketing activities to attract customers without being granted a financial services license is undoubtedly operating as a fraudulent entity.
Financial markets play a crucial role in the global economy by facilitating the efficient allocation of resources and capital. These markets provide a platform where buyers and sellers can trade financial instruments such as stocks, bonds, currencies, and derivatives. By enabling the transfer of funds from savers to borrowers, financial markets support business growth, innovation, and economic development. Additionally, they offer investors opportunities to diversify their portfolios and manage risks.
The main types of financial markets include the stock market, bond market, crypto market, money market, and foreign exchange market, each serving distinct functions but collectively contributing to market liquidity and price discovery. Understanding the dynamics of financial markets is essential for investors, policymakers, and businesses to make informed decisions and sustain economic stability.
Stock Market
The stock market is a vital component of the financial system where shares of publicly traded companies are bought and sold. It serves as a marketplace that connects companies seeking capital with investors looking for potential returns. By issuing stocks, companies can raise funds to expand their operations, invest in new projects, or pay off debt. For investors, the stock market offers an opportunity to own a portion of a company and potentially benefit from its growth through price appreciation and dividends. The stock market also plays a key role in reflecting the overall health of an economy, as stock prices often react to economic indicators, corporate performance, and global events. Major stock exchanges like the New York Stock Exchange (NYSE) and Nasdaq provide structured environments that ensure transparency, liquidity, and regulatory oversight to protect investors.
Bond Market
The bond market, also known as the debt market or fixed-income market, is where investors buy and sell bonds—essentially loans made to governments, corporations, or other entities. When an organization issues a bond, it borrows money from investors and agrees to pay back the principal amount on a specific maturity date, along with periodic interest payments called coupons. The bond market plays a critical role in financing large projects, government spending, and corporate growth by providing a stable source of long-term funding. For investors, bonds are generally considered lower-risk investments compared to stocks, offering steady income and portfolio diversification. The bond market also helps influence interest rates and overall economic conditions, as central banks and policymakers monitor bond yields to guide monetary policy. Major participants in the bond market include governments, financial institutions, pension funds, and individual investors.
Commodities
The commodities market is a marketplace where raw materials and primary agricultural products are bought, sold, and traded. These commodities include physical goods such as oil, gold, natural gas, coffee, wheat, and metals. The market plays a vital role in the global economy by allowing producers, consumers, and investors to manage price risks through contracts like futures and options. Commodities markets help stabilize prices by providing transparency and liquidity, enabling participants to hedge against fluctuations caused by factors such as weather, geopolitical events, and supply-demand imbalances. There are two main types of commodities markets: the spot market, where goods are traded for immediate delivery, and the derivatives market, where contracts for future delivery are exchanged. Investing in commodities can provide portfolio diversification and serve as a hedge against inflation, attracting both individual and institutional investors worldwide.
Currencies Market (Forex)
The currencies market, commonly known as the foreign exchange market or Forex, is the largest and most liquid financial market in the world. It involves the buying and selling of different currencies, allowing businesses, governments, investors, and traders to convert one currency into another. Forex operates 24 hours a day, five days a week, across global financial centers, making it highly accessible. The market plays a critical role in facilitating international trade and investment by enabling currency conversion and helping manage exchange rate risks. Currency prices fluctuate constantly due to factors like economic indicators, interest rates, geopolitical events, and market sentiment. Traders in the Forex market range from large banks and multinational corporations to individual investors, all seeking to profit from currency movements or hedge against currency risks. Because of its high liquidity and volatility, the Forex market offers significant opportunities but also carries considerable risk.
Cryptocurrecy Market
The cryptocurrency market is a relatively new and rapidly evolving segment of the financial world where digital currencies like Bitcoin, Ethereum, and many others are traded. Unlike traditional currencies issued by governments, cryptocurrencies operate on decentralized blockchain technology, which ensures transparency, security, and immutability of transactions. The market enables investors and traders to buy, sell, and exchange cryptocurrencies on various online platforms called exchanges. It has gained popularity due to its potential for high returns, innovation in financial technology, and the growing adoption of blockchain applications. However, the cryptocurrency market is known for its high volatility and regulatory uncertainty, which can lead to significant risks for participants. Despite these challenges, it continues to attract interest from retail investors, institutional players, and developers aiming to reshape the future of finance and digital assets.
The Participants of These Markets
A wide range of participants join financial markets, each with different goals and roles:
More information about these participants.
Individual Investors and Traders These are everyday people who buy and sell assets like stocks, bonds, currencies, or cryptocurrencies to grow their wealth, save for retirement, or speculate on price movements.
Institutional Investors Large organizations such as mutual funds, pension funds, insurance companies, and hedge funds. They invest significant amounts of capital to achieve long-term growth, manage risk, or generate income for their clients or beneficiaries.
Corporations Companies participate in financial markets to raise capital (by issuing stocks or bonds), hedge against risks (such as currency or commodity price changes), or invest surplus cash.
Governments and Central Banks Governments issue bonds to finance public spending, while central banks intervene in currency markets to stabilize exchange rates and implement monetary policy.
Market Makers and Brokers Market makers provide liquidity by continuously buying and selling assets, ensuring smoother trading. Brokers act as intermediaries, executing trades on behalf of clients.
Speculators Traders who seek to profit from short-term price fluctuations by taking on higher risks.
Hedgers Participants like farmers, manufacturers, or importers who use markets (especially commodities or Forex) to protect themselves from unfavorable price changes.
Each participant contributes to market liquidity, price discovery, and overall market efficiency.
THE ETERNAL SOVEREIGN 