ALB Limited 08.03.2022

Types of Market Participants in Forex Market

Forex is an abbreviation for the English word Foreign Exchange. It is the name of the general market in which country currencies are exchanged with each other. Forex trading can also be defined as the bi-directional buying process of one country’s currency against another country’s currency gaining or losing value against a different currency. Also, there are many participants of the foreign exchange market with different purposes and interests.

As mentioned before, Forex trading can also be defined as the bi-directional buying process of one country’s currency against another country’s currency gaining or losing value against a different currency. So, what types of market participants are there in the Forex Market ?

Read on for detailed information on the subject.


Types of Market Participants in the Forex Market

There are multiple participants in the Forex market. The control of these participants in the market is directly proportional to the size of their trading volumes. Understanding these participants and their strategies also creates better investment opportunities in the market. Forex market participants are as follows:

Central Banks and Commercial Banks
Individual Investors
Margin Traders
Forex Dealers
Retail Market Participants 

Who are the participants of the Forex market ?

Central Banks of all countries participate in the Forex market to some extent. Most of the time, this participation is official. Although Central Banks often cooperate in the market in secret ways. That is because each Central Bank has a target range where it wants to see its currency fluctuate. If the falls outside the given range, Central Banks use open market operations to bring it back into the field.

Arbitrageurs are traders who take advantage of price differences in different markets to make a profit. Arbitrageurs have a significant role in the foreign exchange market.

Hedgers can be affected if there is a fluctuation in the currency value. As a result, to protect themselves against these losses, hedgers take opposite positions in the market. Therefore, if there is a negative move in their situation, it will be offset by an upside move in their hedged position. Hence their profits and losses are nullified and stabilized in the operations of their business.

Individual Investors:
Individual investors try to make money by using market fluctuations. The number of investors in this segment is also increasing. The main reason for this is that it is possible to buy or sell at any time in the market.

Margin Traders:
Margin trading in the Forex market is a bona fide deposit with a broker to open and maintain positions in one or more currencies. The amount of margin required may vary depending on the brokerage firm and there are several implications associated with the application.

Speculators are a class of traders that have no genuine requirement for foreign currency. They only buy and sell these currencies with the hope of making a profit from them. Speculators usually do not maintain open positions in any currency for a very long time. Their conditions are transient and are meant to make a short-term profit.

Forex Dealers:
Forex dealers are among the most comprehensive parties involved in the Forex market. They are also known as broker-dealers. Most Forex dealers in the world are banks. For this reason, the market in which the dealers interact with each other is also called the interbank market. However, some major non-bank financial institutions trade foreign exchange.

The Forex market is mainly devoid of brokers. That is because a person does not necessarily need to deal with brokers. If they have enough information, they can get a reasonable price by calling the dealer directly. However, there are brokers in the Forex market.

Retail Market Participants:
They include tourists, students, and even patients who are traveling abroad. Then there are also a variety of small businesses that indulge in foreign trade. Many retail participants participate in the spot market whereas people with long-term interests operate in the futures market.

At ALB Limited, our goal is to provide products and services of universal quality and standards. Follow us for more information.

Tags: Arbitrageurs, Brokers, Forex Dealers

RISK PROBABILITY: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 64.99% of retail investor accounts lose money when trading CFDs with ALB Limited. These products may not be suitable for all investors. Please make sure that you fully understand the risks involved and seek independent advice if necessary. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The value of your investment may go down as well as up.

NEGATIVE BALANCE PROTECTION: Please see your rights here as a retail client.