Forex Market Players

The forex market is the single largest market around the world not just in terms of average daily turnover and average revenue per trader but also the largest market in terms of participants. As the saying goes, the more the merrier. Therefore it is no wonder why so much money can be made (or lost) in this one single market.

If you have always wondered who are the major players, here is the list:

• Commercial Banks. Traditionally known as a savings and lending institution, banks are certainly one of the major players in forex market. Banks are usually involved in both large quantities of speculative trading and also daily commercial turnover.
  
  The really big and well-established banks trade in the billions of dollars in foreign currencies everyday. Some of the trades are undertaken on behalf of their clients while most are through proprietary desks.


• Central Banks. Central banks play an important role in the forex market and that role is controlling the supply of different currencies. They are also responsible for regulating inflation and interest rate.
  
  Central banks are also responsible for stabilizing the forex market. They do this by balancing the country's foreign exchange reserves. In addition, they also have official target rates for the currencies that they are handling. Because of this role, central banks are sometimes jokingly referred to as circus performers because of the daily balancing act that they have to perform.


• Investment Firms. Investment management firms commonly manage huge accounts on behalf of their clients such as endowments and pension funds. Sometimes, these investments require the exchange of foreign currencies so they have to facilitate these transactions through the use of the foreign exchange market.
  
  These situations exist because there are basically no limitations to the nationalities of customers that an investment firm can attract. Therefore, investment managers with an international equity portfolio needs to purchase and sell several pairs of foreign currencies to pay for foreign securities purchases.


• Retail Forex Brokers. These can be individuals or groups of individuals. They handle a fraction of the total volume of the entire forex market, but do not let that fool you. A single retail forex broker estimates retail volume of between 25 to 50 billion dollars each day. Their volume is estimated to make up 2% of the total market volume.


• Speculators. These are the individuals or private investors who purchase and sell foreign currencies and profit through fluctuations on their price. Speculators are a "hardy" bunch simply because they are more adept at handling and maybe even sidestepping risks that regular investors would prefer not to be involved with.