The foreign exchange market is a large financial market that converts foreign currency. As a result, this market has many players. This article will explain with the important influential players in the Forex parachute.
Players in the Forex market have 6 players, follow :
1. Central Bank
Central banks from various countries are important players in the forex market, but they do not engage in profit-seeking activities like ordinary traders because the central bank is responsible for intervening in the currency market to support the country's monetary policy, maintain stability, and increase economic competitiveness.
Central bank intervention can cause the country's currency to weaken or strengthen. The monetary policy of The US Federal Reserve, the Bank of Japan, and the European Central Bank have the biggest impact on the forex market.
2. Commercial Bank
Most of the forex trading volume comes from banks that convert currencies through electronic networks to serve their clients in forex transactions. Moreover, commercial banks also profit from their own trading desks. However, commercial banks are the most important players in the forex market because they have access to information about other players in the market from central banks to hedge funds.
3. International Company
International companies and those involved in import and export have an interest in the foreign exchange market by exchanging currency to pay for goods and services.
For example, if a company in the United States wants to import electronic components from China, it has to convert its currency to yuan to buy goods.
4. Hedge fund manager
Hedge fund managers invest in the forex market on behalf of clients. They are with the long-term goal of finding profit and expanding their investment portfolio. They join the forex market by exchanging currencies to trade with foreign securities for their clients. In addition, profit making in the forex market is also part of the hedge fund strategy.
5. Retail Investors
Retail investors are individuals who participate in the forex market for profit. But their trading volume is much lower compared to commercial banks or financial institutions. They join the forex market by trading through brokers that provide services to retail investors.
6. Broker
A broker is a company that acts as an intermediary for the purchase and sale of currency in the forex market. They can profit from commissions and spreads when retail investors open trades.
Conclusion
The foreign exchange market is the largest currency exchange market in the world. Therefore, understanding the 6 types of players in the forex market can help traders better understand the structure of the market. However, if traders want to trade forex efficiently, they will need to study other information such as news and fundamental factors that influence the forex market as well.
