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Equity Markets are defined as markets which allow the issuance and trading of shares, stocks and securities on the exchanges. In common parlance, they are also referred to as the stock markets. A robust and thriving equities market is generally perceived as an important barometer of a market economy. The presence of equities markets are beneficial to both organizations and investors – companies benefit as they can tap capital funds by entering the market and lay investors benefit as they get an opportunity to buy, sell, hold and accumulate stocks. Equity markets, therefore, facilitate a common platform for issuers and buyers. An example of a prominent global stock exchange is the New York Stock Exchange (or NYSE), NASDAQ, London Stock Exchange, etc.
An index is an indicator or measure of something, and in finance, it typically refers to a statistical measure of change in a securities market. In the case of financial markets, stock, and bond market indices consist of a hypothetical portfolio of securities representing a particular market or a segment of it. (You cannot invest directly in an index.) The S&P 500 and the US Aggregate Bond Index are common benchmarks for the American stock and bond markets, respectively. In reference to mortgages, it refers to a benchmark interest rate created by a third party. Each index related to the stock and bond markets has its own calculation methodology. In most cases, the relative change of an index is more important than the actual numeric value representing the index. For example, if the Financial Times Stock Exchange (FTSE) 100 is at 6,670.40, that number tells investors the index is nearly seven times its base level of 1,000. However, to assess how the index has changed from the previous day, investors must look at the amount the index has fallen, often expressed as a percentage.
Forex stands for the Foreign Exchange market. Each country has its own regulated currency, and the Forex market is a place for trading in all such currencies. The trading of currencies happens in pairs, such as EUR/USD, GBP/USD, USD/JPY, etc. to cite a few examples. It is the largest and most liquid market in the world. Ask price is the price at which a FOREX trader buys a currency pair, whereas the Bid Price is the price at which a FOREX trader sells a currency pair. The difference between the Ask Price and the Bid Price is termed as “Spread”. Thus, Spread = Ask Price – Bid Price. In the forex market, currencies which have the maximum trading volumes against the US Dollar are referred to as the Major Currencies. These currencies are characterized by high liquidity and narrower spreads. USD, GBP & EUR are some prime examples of Major Currencies. In stark comparison to the major currencies, Exotic Currency Pairs are those pairs which are relatively illiquid and have higher spreads.
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