Do you know who the participants in Fx trading are? Knowing about them and the structure of the market is vital. It plays a big part in understanding the market. The Forex market is a big one and it transacts $4 trillion every day. It is not a centralized one like the stock markets. Here the largest traders get the best terms. But it is difficult for any participant to manipulate the market. Let’s know about the participants in the order of their sizes.
1. Central Banks
These are national banks. They issue and lend the national currency. Banks are also responsible for setting the monetary policy. They alter the interest rates and control the supply of the currency. The banks also store a big reserve of other currencies. Banks have many powers, which when executed move the market. The central banks try to keep their currency value within a certain band. They also enter into the market to keep the value within the band. Central banks also lend to other major national banks.
The trading between the banks contributes to most of the market volume. Banks trade for themselves and also for their clients. Citibank, JP Morgan, HSBC, and Deutsche Bank are the top banks. These banks dominate forex trading. Banks act as dealers to large market participants. In this case, they make profits from the bid, ask spreads.
3. Investment Managers and Hedge Funds
The hedge funds and managers of other investments are the primary customers of the banks. To buy securities denominated in other currencies, they exchange currencies. They also speculate upon fluctuations for profit. And hedge funds trade in very large volumes. As hedge funds are the risk-takers, they have a bigger influence on the market.
Corporations also deal with the banks. And larger corporations deal with the larger banks. Many Corporations are multinational in nature and engage in international trade. Even if the corporations don’t do trading, their profits are exposed to currency fluctuations in the market. In a way, corporations are forced into trading. And are at a market disadvantage and they can’t pick and choose the time of their trading.
5. Retail Traders
Retail traders are at the bottom of the chain. We need retail forex brokerages to start and do our trading. The brokers deal with a bank for their trading which in turn may deal with another bank. A survey states that among the retail traders, 70% of the traders are male and 30% are female traders. And the average age of the traders is 35. Among the retail traders, 84% of the traders believe that they can make regular monthly returns. But 30% of the traders are able to make it and get regular returns.
Your knowledge and hard work can make you a better trader. And you can end up as a successful trader.