The international currency market is a rather specific area of activity. Its participants differ in size, number of assets, and influence. And they all have an impact on trends. Therefore, when developing a trading strategy, it is important to analyze the behaviorof Forex market participants.
Central Banks and Commercial Banks
These organizations are the largest players in the market. Their influence is related to the volume of assets and the number of trading operations. The main task of central banks is to regulate currency in the foreign market. They have to prevent sharp changes in the exchange rate of their national currency. In this way, these Forex market participants prevent economic crises within the country. There are two types of influences from central banks on foreign exchange markets.
1. Direct in the form of investments
2. Іndirectly through the regulation of interest rates and the money supply
Of course, the level of central banks in different countries is not the same, nor is their influence on global economic processes. The largest banks in this regard are in the United States, Germany, and England. Firstly, the influence of a bank depends on the development of a particular country and, accordingly, the strength of its currency. At the same time, such organizations cannot be classified as either bulls or bears, as they act according to the situation in the interests of strengthening their country's economy. These Forex market players can work individually and with other central banks to maximize their influence.
Commercial banks' main function is to participate in foreign exchange trading. This ensures the liquidity of their assets and the fulfillment of client orders. The volume of conversion operations of such organizations is quite large and accounts for a significant share of all Forex activity, which affects exchange rates.
The influence of these major participants in the Forex market is significant. To be able to anticipate their actions and adapt in time, traders should put a lot of effort into monitoring the current situation. Assistants will be especially useful in this regard. Therefore, successful traders should pay attention to the best Forex robots for September 2024.
Institutional Investors
These are legal entities that act as managers of certain assets. They may be contributions or shares. Institutional investors manage the money entrusted to them, earning a profit. Examples of such organizations include pension and investment funds, insurance companies, and credit unions. The advantage of institutional investors is the large amount of assets they manage and the large profits they earn. However, such organizations are subject to quite serious government regulation and have many participants, which makes them influential players on Forex and highly dependent on market conditions.
Hedge Funds
It is a private investment fund consisting of the assets of investors who have entrusted their money to trading professionals. Due to their private nature, the activities of such organizations are rather poorly regulated. Another peculiarity of hedge funds is that not everyone can become a member. Each organization has its requirements for potential fund participants. The main selection criterion is, of course, the amount of assets. In this way, hedge funds accumulate a large volume of money that can have a significant impact on global currency markets. Trillions of dollars are involved.
Retail Traders
While large organizations set the price, retailers accept it. Although there are more of them in the market, the share of these participants is much smaller in terms of assets. Their main task is to study the behavior of large players and make every effort to be able to predict it. In this way, retailers can quickly adapt to new market conditions and make a profit.
Multinational Corporations
Foreign trade operations characterize them. As a result, they offer a steady demand and, accordingly, supply of foreign currency. Multinationals often use their free foreign currency balances as short-term deposits. An exciting feature of these organizations is that they usually do not have direct access to foreign exchange markets. Financial transactions are carried out through commercial banks.
Summary
The international foreign exchange market is characterized by a fairly large number of participants who have a specific influence on the behavior of assets. This mainly involves large trading volumes. In that aspect, retail investors are dependent on the behavior of large players and must have the skills of qualitative market analysis to adapt to new trading conditions over time.