There are over a hundred currencies in the world, all reacting constantly to national and international news and market forces. This built-in volatility makes the Forex market the most fluid in the financial world. It is also the largest, with trading taking place 24 hours a day, five days a week from Sunday afternoon through Friday afternoon. Even though only a few currencies - the American dollar, the Japanese yen and the euro - account for the bulk of the trading in the foreign exchange market, there are an average of more than five trillion trades per day.
Who is playing in this game? Is the Forex market a place for the individual investor to be?
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.
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 stays defensive below 1.1750 as USD finds its feet
EUR/USD kicks off the new week on a softer note, holding below 1.1750 in European trading on Monday. The pair faces challenges due to a pause in the US Dollar downtrend, with traders shifting their focus to the delayed US Nonfarm Payrolls and CPI data for fresh directives. The ECB policy decision is also eagerly awaited.
GBP/USD holds steady above 1.3350 as traders await key data and BoE
GBP/USD remains on the back foot above 1.3350 in the European session on Monday, though it lacks bearish conviction and holds above the key 200-day SMA support. The US Dollar holds its recovery mode ahead of key data releases, while the Pound Sterling faces headwinds from the expected BoE rate cut this week.
Japanese Yen adds to strong gains and drags USD/JPY to 155.00 amid hawkish BoJ bets
The Japanese Yen extends its steady intraday ascent through the Asian session on Monday, dragging the USD/JPY pair to the 155.00 psychological mark in the last hour. Against the backdrop of the recent shift in rhetoric from Bank of Japan Governor Kazuo Ueda, an improvement in business confidence reaffirms market bets for an imminent rate hike this week.
Editors’ Picks
EUR/USD stays defensive below 1.1750 as USD finds its feet
EUR/USD kicks off the new week on a softer note, holding below 1.1750 in European trading on Monday. The pair faces challenges due to a pause in the US Dollar downtrend, with traders shifting their focus to the delayed US Nonfarm Payrolls and CPI data for fresh directives. The ECB policy decision is also eagerly awaited.
GBP/USD holds steady above 1.3350 as traders await key data and BoE
GBP/USD remains on the back foot above 1.3350 in the European session on Monday, though it lacks bearish conviction and holds above the key 200-day SMA support. The US Dollar holds its recovery mode ahead of key data releases, while the Pound Sterling faces headwinds from the expected BoE rate cut this week.
Gold climbs to seven-week highs on Fed rate cut bets, safe-haven demand
Gold price rises to seven-week highs to near $4,350 during the early European trading hours on Monday. The precious metal extends its upside amid the prospect of interest rate cuts by the US Fed next year. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.
Solana consolidates as spot ETF inflows near $1 billion signal institutional dip-buying
Solana price hovers above $131 at the time of writing on Monday, nearing the upper boundary of a falling wedge pattern, awaiting a decisive breakout. On the institutional side, demand for spot Solana Exchange-Traded Funds remained firm, pushing total assets under management to nearly $1 billion since launch.
Big week ends with big doubts
The S&P 500 continued to push higher yesterday as the US 2-year yield wavered around the 3.50% mark following a Federal Reserve (Fed) rate cut earlier this week that was ultimately perceived as not that hawkish after all. The cut is especially boosting the non-tech pockets of the market.
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