Forex Market Participants

The forex market has changed in huge ways since its earlier days when only certain financial institutions were trading in the market. With the advancements in technology, trading overseas has been made much easier and has allowed for many different participants in the forex market to emerge in recent years.

Now days, more than 80 percent of the forex market’s overall daily activity comes from transactions that take place in a large range from commercial banks to individual traders. The main participants in the market today are central banks, individual banks, commercial companies, individual investors, brokers and traders.

All of these different investors interact with one another to profit from price fluctuations in exchange rates of currencies by means of buying and selling currency pairs as speculation. This is one large reason that so many people continue to enter the forex market and why it is recommended. With so many different participants, there is always ways to profit no matter what the market is doing.

The commercial banks perform large transactions regularly for their own advancement and also to act as intermediaries for their customers. Central banks on the other hand participate to control the money supply of the respective country, with the main goal being to help the economy achieve its goals. They can operate in order to help restore the price stability of the exchange rate and much more.

When it comes to central banks that participate in the market, some of the more important ones are the U.S. central bank, also known as the Federal Reserve, the Bank of Japan, the Bank of England, the Bank of Canada, the Swiss National Bank, the European Central Bank and the Reserve Bank of Australia.

The commercial companies that we mentioned before can participate in the forex market for speculation. This is to address the need to exchange currencies in their export, import and touristic activities. Also, this allows them to hedge their exposure if the home currency is seen a depreciating; avoiding the possible effects the price fluctuations could have on their company.

Some of these commercial companies are represented by hedge funds or investment funds that include different types of retirement, arbitrage and mutual funds. These kinds of firms protect one investment with another and have been seen entering the market on a more regular basis.

The forex brokers are intermediaries who allow buyers and sellers of foreign currencies to interact. The brokers make their profits through the spread between the bid and ask prices. There are two different types of brokers: market makers and ECN's. These brokers are the ones that many of the individual traders use to buy and sell currencies in the market.

The last group that participates in the market trading forex are the traders. These forex traders can be individuals or small groups that perform speculative and investment operations for their own benefit. They can also act as money managers for third persons. This is the group that most people fall into and this is where many people make huge profits through investment.

Many traders have been known to create their own forex trading business in order to take advantage of huge tax benefits as well. Traders make up a goo mount of the transactions that occur in the forex market and the number of these traders continues to increase.