Market Players
The Forex market is made up of all kinds of players, big and small. Here is a breakdown of who the main players are.
There are seven kinds of market players in Forex. Given below is a brief overview of how and why they trade currencies.
1. The Government
Government organizations participate in Forex when they import or export goods and when the government converts the national currency into reserve currency.
2. Private and Commercial Banks.
Banks trade in the interbank market as well as on behalf of their clients. Central banks also trade on behalf of the government to stabilize their currency.
3. Financial Institutes.
These are big investors and they supply money to banks and companies and thus participate in the Forex market.
4. Big Companies.
When companies buy or sell parts from or to companies in other countries they are essentially participating in the Forex market and contributing volume.
5. Hedge Funds.
Hedge funds invest on behalf of their clients and their sole purpose for participation is to make profits off of trades.
6. Retail Traders.
These may be day traders, scalpers, or swing traders. Retail traders participate in the Forex market to make profits. However, they do not contribute as much volume to the market and so have little role to play in defining the market sentiment.