Congratulations! You've joined an impressive group of Foreign Exchange Market Participants. In the Currency Trading world, that is what the main groups trading currency are called...Foreign Exchange Market Participants. These experienced FOREX players...along with a FOREX beginner as you may be...are all drawn to the FOREX because at the core is it’s all about money. And money makes the world go ‘round – from our individual workday paychecks, to company revenues, to banks, foreign governments and every country. The essence of foreign exchange is this flow and exchange of money between countries. Although the central banks in countries use the FOREX market for moving money back and forth across the globe for a variety of reasons, providing financial stability, liquidity and credit …for our purposes, the essence of FOREX Trading is successful speculation on foreign exchange currency trades to extract profit. So, who are these major FOREX players? There are basically 4 categories of foreign exchange market participants as follows: So let's find out more about each of these groups of currency FOREX players. The Speculators - FOREX Players Group #1
This is you, a FOREX beginner or currency trader - one of a group of four distinct foreign exchange market participants.
Your mission if you choose to accept it, is to speculate in the buying or selling of foreign currency pairs...and through shrewd trading strategy, sound risk management and trading savvy...make a profit off of fluctuating FOREX currency rates at the end of a trade. Individual FOREX speculators like you make up a small but important part of the huge foreign exchange trading market. Speculators also include hedge funds. With what can often be massively sized financial portfolio’s which hedge funds manage, they look to earn equally large to massive returns off of their FOREX speculation efforts. Because hedge fund speculators can wield such huge trade leverage in the market, are often a target for the Central Banks overseeing a countrys' monetary policy, who want to ensure their trading leverage doesn't cause unwanted ripples in that policy. An overview of this entire section including its two other parts can be found at
FOREX Trading for Beginners. The Hedgers - FOREX Players Group #2
Another of the Foreign Exchange Market Participants are large hedgers.
These are large corporations with multi-national operations that span the planet. Think Proctor & Gamble, Coca-Cola, BASF, etc. Their worldwide operations entail numerous international financial transactions with various vendors in any number of countries. And that means having to deal with many different foreign currencies, all of which fluctuate day-to-day. An example of a large hedger could be a major global company like United Airlines. They need to have an ongoing supply of “Jet-A” or jet aircraft fuel to keep their planes flying and “Jet-A” is one of their largest ongoing costs. Airlines run on pretty thin profit margins, and they need to hold their costs, like fuel, down, to ensure profitablity. For example, if United is buying jet fuel from Canada, and paying in Canadian Dollars, and the Canadian Dollar was rising against the US Dollar, United could lock in a lower, current exchange rate today (via a futures contract) for fuel delivery 3, 6 or even 12 months out into the future. This group of foreign exchange market participants "hedge" or minimizing their risk of losing money against a rising Canadian Dollar. If the Canadian Dollar did rise against the US Dollar, and United not hedged, United would have incurred a higher cost, which could have had a negative impact on their thin profit margins. That's an example of how a corporate hedger might trade in the FOREX trading markets. The Interbank Market – Major Forex Players Group #3
The third major foreign exchange market participant is a group of large commercial banks and other large financial institutions who make up what’s called the Interbank Market.
Interbank Market currency trading participants handle FOREX trade transactions with each other around the globe through electronic brokerage systems. This Interbank market has a direct impact on what & how you as a speculator interact in trading the FOREX. How? The various foreign currency prices you as a trader see on trading platforms are the result of these large banks and financial firms' foreign exchange trading activity in the Interbank market as major foreign exchange market participants. Their activity sets the exchange rates/prices/quotes, as they buy and sell currencies at the bid/ask price throughout the day.
Central Banks – Big Foreign Exchange Participants Behind the Scenes
The Central Banks are the fourth group of Foreign Exchange Market Participants that play in the FOREX space.
In the USA, the Central Bank is the Federal Reserve, comprised of its 13 regional banks. In other countries it would be a similar Central Bank setup, serving that specific country and their government. We don’t see or hear too much about Central Banks as they are more behind the scenes, and tend to work hand-in-hand with their countries government regarding monetary policy, etc. However, they exert a huge influence in when it comes to currency exchange. One of their main functions is monitoring and helping to set /adjust a countries monetary policy, helping keep watch over the money supply, interest rates, and other issues that can affect a countries economic growth, including inflation or deflation. You may remember when Allen Greenspan was the chairman of the US Federal Reserve, for what seemed like forever. His periodic announcements on the US monetary policy were awaited and held in such high regard and expectation on Wall Street and across the globe, that news coming out of his mouth could have a direct and sometimes dramatic impact in FOREX currency market movements, speaking on behalf of one of worlds most recognizable Foreign Exchange Participants. With the 2009 global financial crisis, it became crystal clear that serious financial issues can span the globe and not just be restricted to a single country. Thus, foreign government Central banks have taken a greater interest in working more collaboratively with on global monetary issues that affect the world community, so that a repeat of such a serious financial meltdown doesn’t occur again. So, there you have it…a short overview of the major foreign exchange participants. As noted earlier, you surely realize by now, that there is some incredible talent out there trading in the ultimate money game called FOREX. That means, for you to have a chance at success against far more resource-driven and well-funded Foreign Exchange Market Participants and competitors – including some of the most brilliant mathematical and trading minds on the planet - you need to learn as much as you can to improve your currency trading success odds. Remember, the FOREX market doesn’t care if you win or lose at trading. It will gladly take your money when you make mistakes, or it can pay you well when you trade smartly and in an unemotional and disciplined fashion. Continue to learn and soak up everything about FOREX trading and you could become a real FOREX player…or at the least, become a winning Foreign Exchange Market Participant. Click this link to return to the page top of
foreign exchange market participants. As with Future Trading, trading Foreign Exchange instruments carries the same substantial risk of financial loss, and is not suitable for many members of the public. In trading any of the above mentioned financial instruments, only risk capital should be used. The information on this website is provided purely for informational purposes only. You should carefully consider whether trading is appropriate for you Futures-Trading-Mentor.com expressly disclaims all liability for the use or interpretation by others of information contained in this site. Decisions based on the information contained in this site are the sole responsibility of the visitor, and in exchange for using this site, the visitor agrees to hold Futures-Trading-Mentor.com harmless against any claims for damages arising from any decisions that the visitor makes based on such information. While the information on this website is believed to be accurate at the time is is posted, we cannot give any assurances that the information is accurate, complete or current at all times. |
