Forex market is the hugest trading platform in the world and this is much expected as it hugely includes the participation of a lot of corporations or firms and individuals. The market’s size is only followed by credit market.
The largest geographical trading center for the market is majorly in the United Kingdom, therefore, a certain currency quoted price is generally stated in London market price. This is not surprising as the United Kingdom is responsible for over 40 percent of the total trades on the market.
Partakers of the market
Country governments trade on the market as well. They make up a significant number of traders on the market; thereby contributing to the large market’s high liquidity. They trade in large amounts, so they are able to influence Forex rates as well.
Commercial institutions also do play a very vital role in Forex market as a significant segment of the market is from the financial activities of firms that decide to pay for transactions with foreign exchange. However, they majorly trade in just little amounts in comparison with spectators or banks, consequently their trades only have short term effect on the market rates. However, it is possible for some multinational businesses to have unexpected effect when large positions are covered.
National Central banks
Country based central banks play a very vital part in the Forex market as they try to manage the money supply, interest rates and inflation. The central banks have two target rates for their currencies. The first which is the official rate and the second is the unofficial rate. The central banks resort tosubstantial reserves of foreign exchange to equalize the market. However, the efficacy of balancing speculation of central banks is not quite assertive as the banks do not go bankrupt if they make huge losses like most traders do and there is no concrete proof that they do make profit from trading.
Retail foreign exchange traders
These participants form an increasing segment of the Forex market and they do this by either participating via indirect means such as brokers or banks. The increasing prevalence amongst retail traders is due to the emergence of electronic executions which have made Forex trading easily accessible and very easy. The retail traders have a lot of opportunities as there are several broker applications that offer low transaction rates to benefit the traders. They just have to pick the best Forex brokers among them and start trading. Brokers essentially serve as a medium for the customer in the wider Forex market coverage and this is efficaciously done by seeking out the most favorable price in the market for a retail order.
The participants on the Forex market contribute to the global success and popularity of the market. Without notable participants, the market will be unable to maintain its high liquidity.
Each participant plays a major role on the market and together they come to influence the Forex rate of different currencies.