Who Trades Forex?

The forex market is regularly referred to as the largest financial market in the world based on trading volumes. But this massive market was unknown and unavailable to most individual traders and investors until the early 2000s. Now, we’ll take a look at how the forex market is structured and who the major players’ are then you’ll have a better understanding of the movers of this market, and be able to make a better sense of it.

As the prefix suggests, the interbank market is “between banks,” with each trade representing an agreement between the banks to
exchange the agreed amounts of currency at the specified rate on a fixed
date. The interbank market is alternately referred to as the cash market or the spot market to differentiate from the currency futures market,
which is the only other organized market for currency trading.
The interbank market is a network of international banks operating in financial centers around the world. The banks maintain trading operation to facility speculation for their own accounts called proprietary trading or just prop trading for short, and to provide currency-trading services for their customers (these customers can range from corporations and government agencies to hedge funds and wealthy private individuals.). Major banks such as; J.P Morgan, Deutsche, and Barclays are just a few of these major banks which make up approximately 50% of all forex transactions and currency volume trades that are conducted on a daily basis.

Central Banks
The central banks are responsible for forex fixing. Any action taken by a
central bank is most often implemented in order to stabilize or increase the
competitiveness of a nation’s economy. Their actions, policies, and decisions
trigger increases and decrease the value of their country’s currency rates,
mainly in the form of inflation, money supply, and interest rate
control/manipulation. At times their substantial foreign exchange reserves
are desperately required to stabilize the market, thus impacting import/
export prices, price of gas, petrol and even the food you buy on a day-to-day
basis. During periods of long deflationary trends, a nation’s central bank may
have to weaken its own currency rate by creating an additional supply,
which is then used to purchase foreign currency.

Small Banks
Major commercial banks or investment banks across the world play a
significant role when it comes to currency transactions within the forex
market. By trading as a service to their customers who deposit or borrow
money, they are able to make a pleasant profit. This can be seen in an
individual’s savings account, which offers an annual yield to its customers.

Hedge Funds And Investors
Hedge funds are a type of leveraged fund, which refers to any number of
different forms or speculative asset management funds that borrow money
for speculation based on real assets under management. For instance, a
hedge fund with $100 million under management can leverage those assets
(through margin agreements with their trading counterparties) to give them
trading limits of anywhere from $500 million to $2 billion. Hedge funds are
subject to the same type of margin requirements as you or we are, just with a whole lot more zeroes involved.

Business

Such as apple, that may import goods or the Japanese car manufacturing
industry, they would first have to sell their currencies to purchase the
dealer’s currency. They monitor exchange rates to stay on top of expenditure
with the possibility of maybe never placing a trade.

Example: (Apple wants to buy $500 million worth of products from China to
manufacture their devices, first, they’d have to sell their US dollar to buy the Renminbi to purchase these products).

Retail Traders and Small Investors
This is where you fit into the big picture of the forex market. The
term ‘retail traders’ refers to traders who sit in an office or those who are at
home trading their own accounts and learning just like you! Retail traders
account for about 10% of the market participation.

The 1980 introduction of electronic trading platforms allowed any ordinary
person to gain access to the forex market in order to make personal gains on
their individual trading accounts. This caused a massive growth of the forex
market since the past 2 to 3 decades as a majority of people get sold a dream
into getting in for the benefit of making a quick buck. Retail traders however
access the market through an online broker or a bank, where they place
traders based on a combination of fundamental factors and monetary policies
(interest rates etc.) and technical factors such as (support and resistance,
Fibonacci etc.)

A harsh reality is that only 5 to 10% of retail traders really make it,
however with StrictlychartsFX your destination and choice to educate
yourself, you already have a 70% chance of becoming apart of that 5 to
10% statistic but the other 30% depends on you and your work ethic
alongside your mindset of understanding that this isn’t an overnight
success business and you should persevere through the hard times and put in
the necessary requirements.

RESOURCES TO ENHANCE YOUR TRADING

For forex traders to succeed in an evolving market they need to stay ahead of the curve. StrictlychartsFx Market Watch keeps traders up to date with the latest forex events and our currency pair forecasts.  And if you are new to forex or you interested to take your trading to the next level, we recommend our Forex Trading Course to learn how to trade like our experts.