Forex Players - Banks, Pros, and Speculators
In the stock market, players have nearly identical access to the same prices. In contrast, the forex market is broken into multiple levels of access, with price differing at each level. While that may sound unfair, it is directly tied in with volume. The higher the volume, the cheaper the trade. At the top, volume is in the 10s of billions daily.
Banks
At the top (cheapest prices) is an organization of the largest investment banking firms in the world. This organization is known as the interbank market. The banks at this level usually trade billions of dollars every market day. Some players at this level include Deutsche bank, Royal Bank of Scotland, and Goldman Sachs.
Central Banks
The central banks of nation-states are some of the largest forex traders. Just like any other forex investor, they buy and sell currency hoping to make a profit. They are not restricted to their own currency (eg the US Fed can buy the British Sterling).
Commercials
Commercials are largely multinational corporations that trade currency as a part of their business (eg repatriating funds from overseas sales)
Investment Managers
Firms that buy international equities will usually make a forex trade to accompany an equity trade. For instance, to buy into an international stock, they switch to the domestic currency with a buy in the forex market and then purchase the equity.
Hedge Funds
These are large speculators.
Retail Brokers
These cater to small speculative investors.
There is a substantial risk of loss in forex trading.
You should only trade with risk capital that you can afford to lose without impacting your lifestyle or retirement plans.
The views expressed on this site represent the current good faith views of the authors at the time of publication. Please be advised that these views are subject to change at any time and without notice.
