The Forex Market is huge. Everyone says that, but it is difficult to understand the sheer scope of it. Over 3 trillion dollars traded everyday. That is an obscene amount of money. it belongs more in the realm of fantasy than in real life. The Forex market is also the largest when we talk about average daily turnover per trader. All this is even more impressive when you factor in the fact that there are more players in the Forex Market than any other in world. So, who are these fellas? Well, we will go over some of the majors.
Let’s start with the Banks. You didn’t think they only did saving and lending, did you? It’s a wonder we still call them banks. They are involved in all kinds of things these days. Banks are one of the major leaguers in Forex. Some banks trade several billions of cold hard cash…well electronically mostly…everyday. They sometimes enter trades for clients, but the bulk of it is self-motivated. Commercial Companies are not quite as affluent as the banks. Nevertheless, they do their fair share. Sometimes, they generate enough volume to impact the direction of exchange rates. Central Banks are quite powerful as members of the Foreign Exchange Market. They have significant abilities to influence currency supply, interest rates etc. Central banks for countries have “ideas” about how much theur currency should be worth. If things go too far against them, they can take some action to try and influence the markets e.g. by using currency reserves to trade in huge volumes to raise the value of a currency. There’s a lot of this “intervention” going on now that we have a global recession. They are a sinister group.
We then have the Investment Management Firms. They basically pool a bunch of client finances together and play the market in some way. They tend to use the Forex Market to gain access to foreign Exchange, perhaps to purchase assets in another country. Since this sort of investment happens a lot, they do contribute significant volume to the trades. Think Bernie Madoff…or maybe not, since it turned out he wasn’t really doing much investing after all. Then you have Retail Forex Brokers. These are the good folks you open your Forex trading Account with, and who take the opposite position to you when you enter a trade. Lovely guys. They vary greatly in size and volume of trade, but together contribute something like 2% to market volume.
Then you have me, the little individual Forex Retail Trader. A mere drop in an ocean. We barely make a dent on volumes. Apparently, 95% of us trade at a loss. However, we are a relentless bunch. Most of us realize that the opportunity to get involved can be leveraged to make good profits. We may not have the volume, but we don’t care. We are the new kid at school, finally given the opportunity to make something of ourselves.
There’s room for everyone here. Just know your place.