Traders as Market Players

Market Players

After learning the overall structure of the forex market, it is now the right time for you to know the people behind the ladder, the market players. We are going to go a little deeper to properly identify these people. It is very imperative for each one of you to learn and understand the nature of the spot forex market and who are the main market players.

In the past, forex market players were the ones who belonged to elite high class families and individuals. They needed to have at least ten to fifty million bucks to start playing in the market. That’s a huge amount, right? Until the late 1990s, forex was intended to be used by bankers and large corporations and institutions, and not by the small people. Thanks to the advent of technology and internet, online forex trading firms are now able to offer trading accounts to help us “retail” trade forex. This allows the small market players to join the forex market trading industry.

So, who are the major market players? These market players include the Super Banks, Large Commercial Companies, Governments and Central Banks, and of course, the Speculators.

Let’s know these market players one by one.


1. The Super Banks as Market Players

Super Bank Market Players

Among the biggest market players are the super banks. The largest banks in the world determine the exchange rates as well. This is because forex spot market is decentralized. These super banks are responsible for making the bid/ask spread that we all love or hate for that matter. That is according to the supply and demand for currencies.

The banks that comprise the interbank market are the largest banks that take on a very huge amoung of forex transactions in a daily basis not only for their customers but for their customers as well. Some of these banks are UBS, Barclays Capital, Deutsche Bank, and Citigroup. In this case, you could actually say that the interbank market is the foreign exchange market.

2. Large Commercial Companies as Market Players

Large Commercial Company

Companies are expected to do and take their part in the foreign exchange market for the purpose of doing business.  It is expected for a certain company to exchange its money to another currency when buying parts to other countries.  For example, Apple needs to covert dollars to Yen before it can buy products in Japan. These companies trade in a smaller volume compared to those in the interbank market. This is the reason why they need to deal with commercial banks for their transactions to push through.

Mergers and Acquisitions (M&A) between large companies also play an important role in creating currency exchange fluctuations. M&A can create this kind of currency fluctuations. Currency conversions also happen in the international cross-boarder M&As.

3. Government and Central Banks as Market Players

European Central Bank

Among the most famous banks that are regularly involved in the forex market together with the government are the European Central Bank, the Bank of England, and the federal reserve. There is always a reason why a certain company or bank joins the forex market trading. In this case, national governments participate in the forex market for their operations, international trade payment, aand handling their own forex reserves.

So, how do central banks affect the forex market as market players?

Central banks affect the forex market when they make adjustments on the interest rates. This is done to control inflation that affects the currency valuation. However, instances happen when central banks need to intervene either directly or indirectly. This intervention occurs when they want to realign exchange rates. There are times when central banks feel and think that their currency is priced too high or too low. That’s when they start their massive selling and buying operations to alter the exchange rates.

4. The Speculators as Market Players

One of the most commonly repeated phrases among the speculators is, “In it to win it”. Speculators comprise around 90% of all trading volume. They also come in different sizes and shapes. Some have simply fat pockets, some have thin ones, while others have a very small amount of money, but one thing is common, they are market players who engage and join forex market to make a lot of cash or money.

Now, are you ready to be a part of these market players?

It is important for each one of you to know the basics and advance lessons in Forex to ensure your success in the future. Don’t worry. You can have it all for as long as you’re serious and dedicated to join the forex market and be one of the successful market players. So, what are you going to do before joining the forex market? Of course, you need to know your forex history. I am going to explain “Know Your History” in our next lesson.

Proceed to the next lesson: Know Your History

Go back to the previous lesson: Forex Market Structure

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