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Venturing into Forex for the first time?
Explore the basic concepts of buying and selling.

Venturing into Forex for the first time?
Explore the basic concepts of buying and selling.

Who trades Forex?

Major players in the Forex market are financial institutions including commercial banks, central banks, money managers along with hedge funds. Many global corporations also trade in Forex to hedge currency risk. Lastly, there are also individual players in the market who trade Forex for speculative gain, however, the volume they trade is extremely low as compared to the other traders.

Major institutions, players, and traders in the Forex market include:

Banks: Commercial and Investment

Banks exchange different currencies in the interbank market, making it the most prominent platform for currency trading. A large percentage of the total currency volume trades belong to the big banks. They facilitate Forex transactions for clients, conducting speculative trades from their trading desks with a motive to gain from speculation. When banks act as dealers, banks earn profits through bid-ask spread.

Central Banks

The central banks play an integral role in exchange rate valuations through their interest rate policies, open market operations, and fixing their currency prices. The central bank can weaken or strengthen its currency by increasing and decreasing the money supply in the economy, respectively.

Investment managers

The second biggest player in the Forex market after banks are portfolio managers, pooled funds, and hedge funds. Investment managers are regular players in the Forex market, trading large amounts of currencies, including pension funds, foundations, endowments, and more.

Multinational corporations

Firms explicitly engaged in import and export, and conduct Forex transactions regularly, to buy and sell goods and services. These companies pay to the international sellers in their currency and receive foreign currency payments, involving risks associated with foreign currency translations. Thus, they trade Forex to hedge these risks, by purchasing the foreign currency in the spot market or by entering into a currency swap agreement.

Individual Investors

Lastly, retail investors also trade in the Forex market. Such investors generally trade based on inflation rates, monetary policy expectations, interest rate parity, support, resistance, technical indicators, and price patterns. They trade their own money to profit from the market, just like one does in the stock market. While individuals' trade volume is the lowest, they account for the largest number of contributors in the market, reinforcing Forex liquidity.

To trade in the Forex market, an individual is supposed to have a trading account with a broker through a Forex trading platform like Blueberry Markets.

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