A simple guide to the traders in the Forex market
You can be an individual or an investment firm while making your call in the Forex market. Those who trade regularly, they know that Forex is the largest financial largest which trades approximately $5 trillion per day whereas it is $700 billion in the bond market and $200 billion in the stock market. So, you can say the daily value of a bond or stock market equals to one hour’s worth in the foreign exchange market each day.
Now, if you try to classify the participants of the Forex market, you will see 4 different types of participants who remain distinct in this source of finance.
Out of the four participants, the bank is one of them. They also occupy the largest group of Forex traders when it comes to the dollar value of trading. Specially comprised of commercial and investment banks, these participants have high accounts of transactions which they perform on behalf of their clients. They mostly deal with clients who are related to international shipping and trade operations.
As they trade heavily and rapidly, they are also termed as the market makers in the Forex industry. They mostly trade on high frequency, commonly termed as HFT. In HFT, they don’t hold a trade for long and close their trades within fractions of seconds. Since the trades are always frequent and very high in number, the profit is pretty marginal but when accumulated, turns out to be a big amount. Again, many banks serve as brokers to an individual in various investment sectors.
Government is the main administrative organization of the country which is vested with the responsibilities of maintaining the economic condition of the country. The policies adopted by the government reflect on that country’s economic condition which then further affects the Forex trade. Such as- the budget, employment or GDP can play important roles to disclose the efficiency of a government to run a country. Visit this page and read fundamental articles so that you get a generic idea how the market is affected by the economic events.
Government financial activities are run by the central banks who serve as one of the major Forex trading players. The central bank of a country buys and sell a large position of its currency to control the currency’s relative value to another currency. Again, one of the major reasons for participating is to control the money inflation which has been proved to be detrimental to a country’s economy. The central bank also serves as the economic advisor of the government of a country.
3. Private companies
There are large and multi-national firms who need to substantially remain involved in Forex trading for their international business operations. Thus, their contribution makes them one of the major players of the Forex industry. When a company is doing the international transaction, it would require a large amount of that country’s currency it is dealing with. For example, if a US-based company is willing to expand their business in Switzerland, they will first need to buy the Swiss dollar to make their transactions. This would cause an increase in demand for the Swiss dollar which would ultimately affect the market economy of CHF/USD. In this case, there will be a decline in the relative value of CHF compared to USD due to the increasing demand for CHF. As a result, the CHF will become more expensive. Due to their influences over the currency market, private companies have gained an important status as a Forex trading participant.
4. Individual traders
Many individuals trade in solitude for investment profit. They aim to make profits out of the investment they give. In most cases, individual traders don’t trade on a long term basis and mostly invest in short-term trading like day trading or swing trading. Their skills, resource and knowledge also vary based on their conception of trading. Many a time, they are influenced into joining the trading business by various news articles and outlets and see this industry as an easy way of earning money.
so, today we have come to know about the Forex participants who remain involved in this currency trading. Here, from the government to minor individuals, everyone equally contributes to making this industry booming and creating scopes for more opportunities.