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The Four Super Active Market Players in The Forex Market

jhon edult

Who trades the market? Knowing the market players lets you understand more the nature of Forex trading. Before the 90s, the Forex industry was for ‘big boys’ only. Huge financial institutions and banks are the only market participants. This is because the initial requirement to trade in Forex is a capital amounting to ten to fifty million.

Originally, Forex were only intended for banks and those huge financial institutions, not retail traders who have a limited budget for capital. But with the rise of the internet, online brokers started to emerge and retail trading was made available. Check out these market players and how they participate in the market.

The Super Banks

The Forex spot market is decentralized, therefore, the largest banks in the world are the ones that determine the exchange rates. The supply and demand of different currencies are the ones that determine the bid/ask spread.

Super banks or better known as the interbank market, take a huge part in Forex transactions every day to cater to their customers and themselves as well. They are also called ‘flow monsters’. Some of the banks known as flow monsters are Bank of America, HSBC, Goldman Sachs, Deutsche Bank, Barclays, UBS, JPMorgan, and Citi.

Large Commercial Companies

These companies join the Forex market because they mainly want to do business. For example, Apple has to exchange the U.S dollars for the Japanese yen before they can buy some electronic parts from Japan for the items they sell. Because the volume they need is smaller compared to interbank, these market players will choose to deal with commercial banks to gain the currency they need.

Government and Central Banks

Other types of market players that are highly involved in the Forex market are the government and central banks like the Bank of England, the Federal Reserve, and the European Central Bank. Similar to companies, these national banks join the Forex market to sustain their operations, handling of their reserves, and international trade payments. The central bank can intervene either verbally or directly if they want to realign the exchange rate in the Forex market.

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The Retail Traders or the Speculators

Currency speculation is when you buy or hold a foreign currency hoping that it has a higher exchange rate when you sell it in the future. These types of market players are different from those who merely buy currencies to finance their businesses or the services they offer.

Speculation is all about buying and selling of currencies hoping that it will bring forth the much-anticipated profit. Speculators are also more focused on price fluctuations more than anything else. This is called speculation mainly because there is no certainty in your trades because no one really knows if the currency’s price will rise or fall. Before joining Forex trading, traders will first have to assess the possible scenario.

There is a huge number of retail traders who are speculating on the price movement in the market and they come in all sizes and shapes. There are some traders who have a fat pocket while others have just enough capital to open a few positions. No matter the type of trader, their only aim is to obtain continuous success at the end of the day.


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