If you’ve ever come across or traded on the currency markets, then you ought to be aware that the Foreign Exchange or the Forex markets are the largest investment market in the world- studies claim that it is even larger than the stock markets. It comprises of a daily inflow and outflow of cash worth 6.6 trillion dollars, as stated by the Survey conducted by the Triennial Central Bank in 2019.
Being such a significant destination for world currency trade, it definitely comprises of a lot of unique attributes. It holds a ton of surprises of all the new traders as well. In this article, let’s take an introductory look at who trades these Forex markets and how they work.
Introduction to Forex
Let’s start with a brief understanding of the term Forex trading.It is a foreign exchange market that is the ultimate marketplace for all the currency exchanges that takes place across the world. The virtual market also comprises of 180 different currencies from around the globe but limited to the payment options. It is also essential to know that it is a 24-hour market that is closed on the weekends.
Who trades Forex?
Aside from being the most extensive global currency marketplace, it also comprises of many kinds of traders and players. Some of the notable names and most trades of the FX are mentioned below:
- Commercial and investment banks:The interbank market is the destination for the most significant volumes of currency, with electronic networks. Banks are the primary sources for the source of money in the market also facilitate transactions for the clients with their own trading desks. In simple terms, they act as the dealers for the clients, which also represent the bank profits.
- Central Banks: It is not wrong to mention here that the central banks play a crucial role in the Forex market. Various factors, like the interest rate policies, and also the influence of the currency rates, play a vital role in the central bank, to a large extent. They’re also responsible for fixing the native currency on the Forex market.
- Hedge funds and investment managers:Pooled funds, hedge funds and the portfolio managers are the most significant players of the FX market, the investment banks and the central banks. They help in trading money on larger accounts like that of the endowments, foundations and also the pension funds.
- Multinational corporations:Firms are generally always engaged in providing Forex goods and services and also pay for them. Consider when a German solar power plant is manufactured in the US and exported to China. The currency ought to be produced in Euros, from the Chinese currency. This is dined by the multinational corporations.
- Individual investors:Compared to all the financial institutions and the central and corporative banks, the volume of individual investors is minimal and extremely low. However, when compared to the earlier years, this has increased in recent years, and the number of individual investors is growing substantially.