When talking about the biggest financial market – you will most likely be referring to the Forex market. It is also called a Forex exchange or currency exchange. Either way, this market is the largest, even a lot larger than the stocks market due to its $6.6 trillion transactions happening every day.
In the new era of technology and advancements in the way money and profits are earned, Forex trading has been a huge part of the blossoming industry. Combined with its amazing attributes, this generally became the driving point of people in joining the Forex market.
Important Facts About Forex Trading
There are different terms being used in the Forex market and this includes the word ‘exchange rate’. This term refers to the price which must be paid in exchange for one currency against the other.
There are a total of 180 currencies used by different nations all over the world. But in most international trades and payments, the currency that is usually used are Euro, Japanese yen, U.S dollar, and the British pound. There are other popular currencies that are used to trade on different instruments. They are the New Zealand dollar, Canadian dollar, Australian dollar, and Swiss franc. Currency pair trading in the Forex market goes on for 24 hours, 5 days a week.
You must also understand the importance of having a reputable Forex broker in UK. Finding one will provide great help in trading.
Who Trades in the Forex Market?
There are many market players in the Forex market and each of them comes from a different industry. Check out these institutions that are actively trading in the forex market.
Commercial and Investment Banks
If you are pertaining to the biggest market players in the Forex market, then it would be the investment and commercial banks of all sizes. Huge banks are contributing a huge percentage of the overall volume of trades in the market. They are the ones who facilitate the transactions in Forex.
Central banks are the ones that represent the government of a particular nation. They are known as ‘extremely’ important players that contribute to the growth and development of the Forex market. The interest rate policies and the open market positions are the ones that influence the currency rates in the market.
Hedge Funds and Investment Managers
Hedge funds, pooled funds, and portfolio managers are another group that takes up a huge part of market participants. Investment managers are the ones that trade currencies that are used for large accounts such as endowments, foundations, and pension funds.
They are the firms that do import and export business. They do forex transactions for payment of international goods and services. The main reason why companies trade Forex is that they want to hedge the risks which are associated with foreign currency translations. When you hedge against currency risk, you are given an added level of safety towards offshore investments.
Finally, here comes the individual or retail investors. Before, they were not allowed in the market because of the small capital that they could produce. But thanks to the online Forex trading platforms and Forex broker in UK that we have nowadays, retail traders are now a huge part of the Forex market.