Market Participants In Currency Trading

Forex trading is the fastest growing business industry of the world today. It has become a worldwide trading industry with global coverage of participating entities. Unlike the equity market, where investors often only trade with institutional investors or other individual investors, there are additional participants that trades in the forex market for entirely different reasons. So, it is essential for you to identify and understand the main functions of the market participants in currency trading.

The main market participants in forex trading include central banks, multinational commercial companies, banks involved in inter-bank marketing, investment firms, hedge funds involvement and retail forex brokers. Central Bank plays a key important role in the currency trading market. They basically control the money supplied, inflation rates and the interest rates. They often exhibit an official target rates with their own currencies.

They have the ability to stabilize the forex market. They are also often involved in manipulating reserve volumes in order to meet certain economic goals. Commercial companies, other forex market participants, also play an important role in forex market. These companies seek out foreign exchange for the purpose of purchasing goods and services. They have little impact on the forex market rates at the same time they can contribute fairly well in the forex market with unpredictable outcomes. Inter-bank marketing covers majority of the commercial trading daily. It is the market through which large banks transact with each other and determine the currency price that individual traders see on their trading platforms.

The investment management firms are responsible of managing their customer's large accounts such as endowments and pension funds. The transaction of foreign securities is facilitated using the forex market. The hedge fund involved comprises of private investment fund charged with a performance fee that is limitedly open to a few qualified investors to join. These market participants in currency trading can typically control equity of billion dollars. They also have the capacity to borrow for billion dollars more which can overwhelm the Central Bank's intervention in supporting any currency.

Retail forex brokers basically involves two types of brokers in forex market, brokers that offer immediately delivery, i.e. currencies that are purchased and then delivered to various bank accounts, and brokers that offer speculative trading.