Who is playing in this game? Is the Forex market a place for the individual investor to be?
Banks
Since their function is to handle money it is no surprise that banks are the biggest traders of foreign currencies. About half of all trades on the Forex market are executed among banks, a phenomenon known as "interbank trades." While many of these are performed as a service for customers with international business, a high percentage of transactions are speculative plays from the banks' own accounts, attempting to cash in on the short-term volatility of the Forex market.Central Banks
While investment bankers are the most ubiquitous traders in the forex market, it is the central banks that carry the most clout. These national money watchdogs possess the power to intervene with a currency, jiggling the value of a nation's money to maximize that country's economy on the world stage. This can be done to juice exports or reign in galloping domestic inflation for instance. A Forex trader needs to be ever vigilant in assessing the actions of a central bank.Hedge Funds
Hedge fund managers are the largest group of non-institutional investors in foreign currencies. Often they are trading currencies as part of an international portfolio for large accounts. But investment managers will also engage in speculative bets on the future values of another country's currency.Corporations
Multinational companies buying raw materials and selling products are entwined in the Forex markets. With so many foreign transactions taking place, companies can find themselves exposed to unnecessary risks involved in currency fluctuations. To counter these dangerous positions managers will trade on the Forex exchange to hedge against such risk.Although its popularity is on the rise, few forex market trades come from individual investors in comparison with banks and financial institutions. The fundamentals of trading foreign exchanges are much like trading equities - you just need to apply them to countries and not companies.
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.
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