Trading in the forex market offers a lucrative venture to potential traders. Until the late 1990s, only the “big guys” could enter the forex market. Those who wanted to enter were required to have about 10 to 50 million dollars starting capital.
The foreign exchange market was originally designed for use by bankers and large institutions and not by individuals. However, the Internet boom has allowed ordinary persons to trade and set up trading accounts. There are many major players in the forex market that can impact trading. Here are the six major players in the forex market:
Commercial and investment banks
Commercial and investment banks are the foundation of the forex market. Other players deal with them so they can take part in the market. They are also the founders of foreign exchange, which started it as an additional service to deposits and loans.
Central banks are also major participants in the forex market but are independent from commercial and investment banks. According to Robert Peter Janitzek, central banks have different goals when exchanging foreign currencies. The main goal of central banks is to provide adequate trading conditions in their home country, controlling availability and money supply. Central banks also intervene in the forex market during times of economic and financial imbalance.
High net worth individuals participate on the forex market through the intermediation of commercial and investment banks. In the US, such persons are defined as having investable assets of more than $1 million, excluding their primary residence.
Hedge funds consist of high-net worth individuals that work in partnerships. Robert Janitzek reveals that they have a very large pool of investment totaling to above hundreds of millions of dollars.
Any sized business
The fifth player in the forex market consists of businesses and corporations of any size, ranging from small exporters/importers to multi-million enterprises. They are mainly driven by the needs of their business operations. They are called “commercial traders” and use the financial market to hedge their operations by offsetting exchange rate risks. Mergers and acquisitions can have an impact on price fluctuations.
Individuals are people who exchange their home currency for another, most often when they are visiting a foreign country to pay for goods and services in the local currency. In forex trading, they are private traders, commonly known as “freelancers,” who use different online trading platforms to make profit from price fluctuations.