Participants in Forex Market
Forex trading has already established itself as one of the most rapidly developing financial markets in the world, with numerous participants joining the Forex market everyday. The number and nature of participants in the Forex market have changed a lot from the initial years, with the spread of Internet and computer.
In the initial days of Forex trading, mostly the international banks, government banks, large financial organizations or other corporate houses were the participants in the Forex market. But in the recent years, the private investors have also joined the Forex market and are making profits with very small amount of investments. The individual investors in Forex market mostly do trade through online Forex trading, with the help of Internet.
Forex trading is actually the trading of different currencies. In the Forex market, a participant buys the currency of a nation and sells the currency of another and gains profits in the process. The banks and other institutions can easily buy and sell currencies in Forex market and the main purpose of the market is to help international trade and investment. The Forex market helps businesses to convert one currency to another. Most trades in the Forex market are done between large commercial banks.
Now, let’s have a look at what type of participants are there in the Forex market. There are usually four types of people involved with the Forex market that include the banks, brokers, customers and central banks.
Banks: The banks are the biggest participants in Forex market. They earn their profits by buying and selling currencies to and from each other. The banks are involved in around two-thirds of all Forex transactions.
Brokers: Brokers are those who act as intermediaries between banks. The Forex traders always contact them to find out where they can get the best price for currencies. The brokers always maintain anonymity to the buyer or seller and they gain profits by charging a commission on the transaction they arrange.
Customers: Customers comprise a major portion of the Forex market. The large companies usually require foreign currency during the course of doing business or making investments. There are also some other types of customers in Forex market that include the individuals who buy foreign exchange to travel abroad.
Central Banks: These are another type of participants in Forex market. The central banks sometimes participate in the Forex market with a view to influence the value of their country’s currencies.
All the above mentioned participants in Forex market play vital roles in the formation and development of the market. The daily turnover of the Forex market is estimated to be around $3 trillions at the moment and the activity of the participants largely affects the value of every currency.
