Know the Participants of Forex Trading Articles | Personal Finance

By: Guy Starbuck

Forex trading involves trading between different countries of the world, their currencies and the precise timing of investing in some specific currencies. But who are the players in this ever-volatile and fluctuating market? Who are the intermediates through whom the transactions are completed? All forex trading is usually completed with the help of a broker or a financial institution. While there are plenty of people involved in forex trading, similar to stock trading, the former takes place on a larger scale and on a global platform. Majority of forex trading takes place between governments, banks and other large financial institutions. Of course the smaller retail investors are also present, often referred to as spectators, as their scale of investment is smaller compared to the biggies. The financial situation of a country makes the forex market fluctuate. It involves trading of millions between some of the most powerful countries of the world as well as smaller countries.

It has been observed over the years that majority of transactions in forex trade is done by banks and hence this is called inter-bank. About 50% of all forex trading is done by banks. Thus the lesson to be drawn from here is that if banks can use this machinery to make money for the stock holders and for bettering their operations, you can imagine that there is money for the small investors as well. To increase the amount of money held by a bank, it participates in forex trading on a daily basis. It is possible that a bank can invest millions of dollars in a day and the next day make the interest earned available to its stock holders, etc.

There are many commercial enterprises like Deutsche bank, UBS, Citigroup, HSBC, Braclays, Merrill Lynch, JP Morgan Chase, Goldman Sachs, ABN Amro and Morgan Stanley and more who also trade in forex markets. They do this to increase the value of wealth to stock holders. Though the number of smaller companies participating in forex markets is relatively low, but they are there nevertheless. The amount of investment and trading done by smaller businesses is negligible in comparison to the trading done by large corporations and financial institutions.

Central banks play the most important and critical role in the functioning of the forex market. The supply the money and control the interest rates. The sheer availability of money for the forex markets depends on the central banks. These are located in Tokyo, London and New York. Though these are not the only central locations for forex trading but definitely the largest involved in the market. It is possible that banks, commercial enterprises or central banks incur heavy losses – and these are passed on to the investors. Otherwise all parties concerned can enjoy the benefits of huge monetary gains.