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Who Trades the FOREX Market?
by Mario Singh
Central Banks and Governments
Policies that are implemented by governments and central banks can play a major role in the Forex market. Central banks can play an important part in controlling the country’s money supply to insure financial stability. Things that they do;
Commercial Banks
A large part of Forex turnover is from banks. Large banks can literally trade billions of dollars daily. This can take the form of a service to their customers or they themselves speculate on the Forex market.
Hedge Funds
As we know the Forex market can be extremely liquid which is why it can be desirable to trade. Hedge Funds have increasingly allocated portions of their portfolios to speculate on the Forex market. Another advantage Hedge Funds utlilise is a much higher degree of leverage than would typically be found in the equity markets.
Corporate Businesses
The Forex market mainstay is that of international trade. Many companies have to import or export goods to different countries all around the world. Payment for these goods and services may be made and received in different currencies. Many billions of dollars are exchanged daily to facilitate trade. The timing of those transactions can dramatically affect a company’s balance sheet.
Man on the street
Although you may not think of it, the man on the street also plays a part in today’s Forex world. Every time he goes on a holiday overseas, he normally need to purchase that country’s currency and again change it back into his own currency once he returns. Unwittingly, he is in fact trading currencies.
He may also purchase goods and services whilst overseas and his credit card company has to convert those sales back into his base currency in order to charge him.
Speculators and Investors
Both will have their reason for believing a particular currency will perform better or worse as the case may be and will buy or sell accordingly. They may decide that the Euro will appreciate against the US Dollar and take what is called a long position in Euro. If the Euro does in fact gain ground against the US Dollar, they will have made a profit.
Read it more at AskMarioSingh.com
Who Trades the FOREX Market?
by Mario Singh
Central Banks and Governments
Policies that are implemented by governments and central banks can play a major role in the Forex market. Central banks can play an important part in controlling the country’s money supply to insure financial stability. Things that they do;
- Manage Inflation
- Control Interest Rates
- Regulate Money Supply
Commercial Banks
A large part of Forex turnover is from banks. Large banks can literally trade billions of dollars daily. This can take the form of a service to their customers or they themselves speculate on the Forex market.
Hedge Funds
As we know the Forex market can be extremely liquid which is why it can be desirable to trade. Hedge Funds have increasingly allocated portions of their portfolios to speculate on the Forex market. Another advantage Hedge Funds utlilise is a much higher degree of leverage than would typically be found in the equity markets.
Corporate Businesses
The Forex market mainstay is that of international trade. Many companies have to import or export goods to different countries all around the world. Payment for these goods and services may be made and received in different currencies. Many billions of dollars are exchanged daily to facilitate trade. The timing of those transactions can dramatically affect a company’s balance sheet.
Man on the street
Although you may not think of it, the man on the street also plays a part in today’s Forex world. Every time he goes on a holiday overseas, he normally need to purchase that country’s currency and again change it back into his own currency once he returns. Unwittingly, he is in fact trading currencies.
He may also purchase goods and services whilst overseas and his credit card company has to convert those sales back into his base currency in order to charge him.
Speculators and Investors
Both will have their reason for believing a particular currency will perform better or worse as the case may be and will buy or sell accordingly. They may decide that the Euro will appreciate against the US Dollar and take what is called a long position in Euro. If the Euro does in fact gain ground against the US Dollar, they will have made a profit.
Read it more at AskMarioSingh.com
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