Trading in the forex market has gained rapid momentum in the past years. Most retail traders these days are flocking to the forex market for making profits. Although the forex market seems like an unregulated and risky market at first glance, such is not the case.
Though there is some element of risks involved with trading, using investment percentage and leverage wisely, any trader can make huge profits.And since you are reading this blog post, we assume you are thinking of starting trading in the forex market.
If you are, then you are going to have an exciting time trading in this market while making pure profits. But first, you must have basic information about what the forex market is and who can trade in forex. And that’s what this blog post is about.
We will tell you briefly about the main elements of the forex market and who trades in the market for a better understanding and enhanced forex trading experience. So, let’s get started!
What is the forex market?
Forex is the abbreviation for foreign exchange. And as the name suggests, foreign exchange will involve trading in foreign currencies. In the forex market, one currency is bought by selling another currency. Hence, the trading is always done in currency pairs.
Now, there are more than 180 foreign currencies that can be traded in the forex market but there are some major currency pairs that are most attractive to traders. The most popular currency pairs are USD/JPY, EUR/USD, USD/CHF, and GBP/USD.
Apart from these major currency pairs, there are some commodity currency pairs too such as AUD/USD, NZD/USD, and USD/CAD. These currency pairs fluctuate based on the price fluctuation in major commodities such as oil.
Also, forex trading doesn’t incur any commission, unlike the stock market. So, every penny you invest will give your pure profits. But you must always be wary of the risk and consider your investment capital to avoid incurring losses.
Another unique thing about the forex market is that trading can occur 24 hours a day. The forex market is open from Sunday to Friday to accommodate the different time zones around the world. This allows you to trade at your convenience.
Now, that you have a basic idea about the forex market, let’s move further and get to know who trades in the forex market.
Who trades in the forex market?
Several players in the forex market are involved in trading. And there moves in the forex market can tremendously affect the currency pair value. So, let’s see some of the major players in the forex market.
These are some of the most important players in the forex market as they represent a nation’s government. And they have a major impact on the value of any currency pair.
One of the major responsibilities that central banks have is setting the price of the native currency. This will be the price on which the native currency will be traded in the market. Sometimes, central banks try to shake things up to increase competitiveness or stabilize their native currency.
Hence, any action taken by central banks will have a major impact on the currency pairs. These actions can lead to depreciation or appreciation of the native currency. There are examples, where central banks have weakened their native currency to create a competitive export market.
Hence, when you are trading in the forex market, you must always keep a close eye on the actions of different central banks. These can serve as an excellent indicator of the market condition allowing you to make the right decision.
Investment and commercial banks
The Interbank market is one of the greatest platforms where major currencies are traded. Banks of all sizes can be involved in transacting international currency pairs through network transactions.
These banks allow their clients to carry out forex transactions giving the banks a chance to trade. The bid-ask spread will determine the profits made by the banks.
Hedge funds and investment managers
This is the second-biggest category of traders that actively trade in the forex market. Most investment managers trade in the forex market for pension funds, endowments, and large accounts.
They also trade in the forex market for foreign securities. In addition to investment managers, hedge funds also trade actively in the forex market. They trade currencies to execute some of their investment strategies.
This includes the retail traders who are actively trading in the forex market. Although their volume is quite low as compared to central banks, financial investors, and fintech companies.
However, the number of retail traders is increasing by the day. Most traders are trade currency pairs based on technical pairs and fundamentals.
Several multinational corporations that are involved in exporting and importing products also trade in foreign currencies. Companies import and export products and pay in foreign currency and those transactions are considered under forex trading.
Multinational corporations can also trade forex to hedge during foreign currency transactions. These companies can also buy currency in the spot market or currency swap. So, these companies are also an important part of forex trading.
So, as you can see forex market has great potential for trading. Hence retail traders are turning towards the forex market for trading currencies. Also, now you know about the major players of forex market trading.
These major players can drastically affect the forex market and the quoted price of currency pairs. So, you need to have a close eye on the actions of these major players.
But before you leave, we will also tell you an excellent online platform where you can get to know everything about the forex market. And it is none other than ForexTraders Guide!
This is an outstanding online platform that has been started by several experienced traders who want every beginner and pro trader about the forex market. You can get to know about the forex glossary, forex strategies, analysis reports, and more.
With this platform by your side, you can effectively trade in the forex market. So, don’t hesitate! And start trading in this exciting fluid forex market!