The Major Forex Market Players and Why They Trade Currencies

Michael Fasogbon

Updated: 17 November 2023

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The currency market is the largest market across the globe. It’s a digital site whereby one currency is merely exchanged for another.

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The forex market dwarfs all markets such as the bond, stocks, and commodity by a substantial margin.

The forex market is composed of several currency pairs. However, for most of the international trades, the payments are made in Euro, the US dollar, and the Japanese Yen.

Also, the British pound, Australian dollar, Canadian dollar, Swiss Franc, and the Swedish krona are used.

The forex market is open 24 hours a day for five days a week. The currency pairs are exchanged in either the spot market, forward market, the swaps market, or the options market.

Major Forex Players

The currency market does have not only several players but also several types of players. Here are some of the major types of players in currency trading:

The Banks

When it comes to the interbank market, currency trading ranks highly. The banks in the interbank market trade the currencies with each other via electronic networks.

With the banks, those deemed to be large banks usually take the larger share of the total currency traded.

Furthermore, banks facilitate currency transactions for clients. When acting as dealers, the banks make profits via the bid-ask rate or merely spread.

Corporations

Firms that engage in exporting and importing goods and services conduct forex transactions in order to pay for such transactions.

Huge companies trade currencies to hedge all the risks that are associated with forex transactions.

Basically, these types of companies aren’t in the business of forex trading, but they are typically hedging as well as managing currency risks arising due to their fundamental commercial activities.

Hedge Funds

Literally, the banks are at the top of the list as dominant players of the currency market.

Following closely are the portfolio managers, pooled funds, and hedge funds. Investment managers usually trade currencies for huge accounts like foundations, pension funds, and endowments.

The funds employ the traders who speculate in the currency market as well as act as clients of huge market makers. Some funds execute the trades automatically on an algorithmic basis.

Central Banks

Another key player in the currency market is the central banks of countries across the globe.

Their great impact is as a result of the operations in the open market as well as the interest rate decisions. Moreover, they are responsible for forex fixing (an exchange rate regime).

Any action by the central bank in the currency market is done to correctly stabilize or simply increase a nation’s economy and its competitiveness. Besides, they engage in currency interventions to make currencies depreciate or appreciate.

A central bank may be responsible for weakening its currency by merely creating additional supply at specific periods of extended deflationary trends.

Individual Investors

Unlike financial institutions or companies, the number of forex trades by retail investors is low, but the volume is increasing.

Most retail investors base their trades on both fundamental factors as well as technical factors.

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The Bottom Line

The forex market is not the largest for nothing: It empowers a vast of players from the central banks to the retail investors.

Various strategies can be used in forex trading, such as carry trade, which has a significant impact on the global economy.

Therefore, as a trader, knowing all the players in the forex market will benefit your trading experience.

The Major Forex Market Players and Why They Trade Currencies

Michael Fasogbon

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