You need to know who the players in the game are, and what exactly they do or what they are there for, to completely understand the Forex market. It is very crucial that you understand the nature of the Forex market and all of the people who are in it. Until the 1990’s hit, only the larger companies and higher standing officials were allowed to do the trading company. You couldn’t trade with less than ten to fifty million dollars. Forex was invented for the banks and large businesses that needed to trade currencies for their own needs. Since the internet has made way however, the smaller people in the world are now able to trade with smaller amounts of money. We are essentially called the ‘retail traders’ of the Forex world.
Some of the market players in the Forex market include:
Large Commercial Companies
There are a lot of large companies that take part in the FX market just for the purpose of doing business with other large companies. A lot of people will go to the companies for the exchange of their money rather than the interbank market exchange, since the rates are lower in the end. The merge and exchange between two companies can create currency exchange rate fluctuations. This is because of the border exchange. A lot of currency conversions can move prices around to a decent extent.
Super Banks and Larger Scaled Banks
The spot market for Forex is decentralized, it is one of the largest banks in the world that determine what the exchange rates are, and when they get to be changed. They base their changes and decisions on the supply and demand for currencies. They make the spread based on the information that they are given. The large banks in this system usually are called as the interbank markets within the system. They are the ones who will take on large amounts of transactions for the Forex companies for both their company and the customers that they deal with. One of the biggest banks in this group is Citigroup. This interbank market is pretty much the soul of the foreign exchange market.
Speculators of Forex
Speculators of the Forex market are in it to win it each and every time they trade. They comprise around 90% of all the trading volume that is going on within the market. They come with different values and needs. Some will put down a large amount of money, while others put down only a small amount. The one common thing between them all though, is that they all join Forex to make it big and get loads of cash in the process. Anyone can be a speculator with the training off of the internet.
Central Banks and the Governments of Forex
All of the central banks around the globe are involved in the market. It does not just involve the United State central bank. National governments from around the world participate for many reasons which include international trade payments or handling the foreign exchange reserves that they have. Central banks are the ones who control the inflation since they can change the interest rates. This can deeply affect currency valuation. Central banks will also come in between a trade directly or verbally if they want to realign any of the exchange rates that are shown. They might think the rate is either too low or too high, so then they will sell/buy their trades to alter any and all exchange rates to the right interest and rate.
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