What is forex trading? Market participants.
Forex is one of the largest world currency markets. A greater percentage of its participants are speculators who receive income from currency fluctuations. Forex is a powerful international network that implies the unification of the largest banks and various financial institutions, united by one goal - enrichment.
High liquidity and huge trade turnover of the market are provided by many of its participants - buyers and sellers who constantly carry out currency exchange trading operations. Thus, mutually beneficial exchange of goods is carried out, as a result of which market participants perform speculative operations and make a profit. The Forex currency market allows you to take a large income even with minor changes in price. The difference between supply and demand offers good prospects for professional traders. And the accessibility and opening up opportunities for all comers joins the ranks of participants in the foreign exchange market.
The main Forex participants:
1. Central banks.
Their main task is to balance the currency balance, that is, to prevent sharp changes in exchange rates in order to maintain economic stability. The goal of central banks is to prevent sharp crises in the country's economy, while maintaining export-import equilibrium. Banks can influence the foreign exchange market in several ways, for example, by conducting interventions or changing interest rates, reducing or increasing the money supply.
The Central Bank can exert both a single influence on national currencies and act simultaneously with other central banks in order to conduct coordinated interventions or other impacts. Central banks have an impact on world markets. They study and analyze economic data. Using statistics, they select the most successful way for economic development. The most influential and significant banks are: the Central Bank of the United States of America, the Central Bank of Japan, the ECB (European Central Bank).
Central banks can attract commercial banks to carry out their tasks, and their main goal is not to make a profit, but to coordinate the situation.
The Central Banks cannot be considered “bulls” or “bears,” because they must resolve issues in the current situation, that is, they can raise or lower the state exchange rate as necessary.
2. Commercial banks.
They bear the bulk of all trade transactions. They carry out various financial activities for their investors, and through operations with clients they study and regulate the currency needs of the market. In addition to executing credit and deposit and other trade transactions, commercial banks carry out independent trading at their own expense, as a result of which the foreign exchange market can be considered a market of interbank transactions.
The largest commercial banks that conduct daily transactions worth several billion dollars are Citibank, Deutsche Bank, Union Bank and others. Large volumes of transactions they make can significantly affect the change in exchange rates. Such serious players usually act as "bulls" (for them it is important to increase the price of the currency) and "bears" (they prefer to reduce its value). If there is a threat of imbalance between the “bulls” and the “bears”, there is a chance of a sharp and prolonged jump in the exchange rate.
3. International investment funds and corporations.
The companies that take part in conducting trading with foreign partners are various pension, insurance, investment and other organizations that place capital in securities and securities of other countries. They can use investments for the development of foreign production and use the currency in trading with foreign partners. Corporations can also conduct foreign investments, for example, the creation of joint ventures, companies, etc. Such funds do not receive income from currency fluctuations and do not have direct access to the foreign exchange market. They make the necessary transactions through commercial banks.
4. Currency exchanges.
The main world exchanges are located in New York, Tokyo and London. They have a special influence on the formation of currency quotes and conduct currency conversions for law firms. The work of currency exchanges is not limited by space and time, and thanks to highly developed technologies, all financial organizations can use their services, choosing the method convenient for themselves (directly or with the help of trusted agents - brokers). In addition to world exchanges, there are also national ones. On exchanges, except currencies, it is possible to work with other instruments (stocks, futures, options, etc.).
5. Brokerage firms.
Brokers are the link between sellers and buyers. They receive income in the form of commission interest on the volume of the transaction, regardless of its outcome. Usually the spread is the broker's salary (the difference between the purchase and sale prices).
Brokerage offices help smaller firms and private traders to take part in Forex trading operations. They work as representatives of their clients and can provide various additional services: a trading platform, leverage, instant execution of orders, etc. By choosing a reliable broker, traders can significantly increase the likelihood of good earnings. In addition, many dealing centers provide advice, training and many additional free or low-cost services.
The profit of the broker depends on the number of transactions that their investors make. The more profitable transactions a client concludes, the more money he will invest in further trading. Therefore, the benefit of brokers is a stable, comfortable and profitable trade carried out by their customers.
6. Private individuals.
The smallest market participants are individuals - traders. To become a trader, you just need to register and open a deposit account in one of the dealing centers. The main task of the trader is to make a profit on changing exchange rates. In addition, they complement the demand for currency for tourist trips, the purchase of foreign goods and more.
The largest commercial banks carry out most trading operations. But computer progress and continuous improvement of the workflow have opened access to the international Forex market for small private investors. Every day the number of traders is growing, who have received the opportunity to make significant profits by investing personal funds in trading.
Different types of participants pursue, in principle, the same goal: "buy cheaper - sell more expensive", but each group plays its own specific role in the international Forex currency market.
Having joined the ranks of market participants, you too can become a small engine of a large mechanism, and earn good rewards on this. Come in, take part, and catch your luck!