7-1 reads the final scoreline in a match between Manchester United and Roma. In that match, 1 defender, 2 midfielders and 2 strikers scored for Manchester United. In the game of soccer, you will hardly hear of defenders scoring. Their main job is to defend after all!
The currency market, like soccer, has many players. Each player has his own role. Knowing the big players in the foreign exchange (Forex) market sets you up for success. This is because you will know whose activities to pay closer attention while trading currencies.
#1 Major Banks (aka Super Banks)
Unlike the stock market, Forex trading is decentralized; there is no exchange for currency trading. The largest banks in the world determine the exchange rates of currencies.
As these banks determine the exchange rates, they are highly involved in most of the Forex transactions. This special class of banks include Barclays, Citi, Deutsche Bank, HSBC, JPMorgan, and UBS.
#2 Large Commercial Companies
In this highly globalized world, raw materials and components are shipped to countries for the final assembly. Currencies are exchanged for most import and export activities. Such an example is the purchase of OLED screens by Apple from Samsung Electronics. Apple need to exchange their USD to pay Samsung Electronics in Korean Won.
Mergers and acquisitions between corporations in different countries affect currency rates as well.
#3 Governments And Central Banks
Governments and central banks (European Central Bank/Federal Reserve) conduct open market operations for the purpose of their operations, international trade payments and also handling their foreign exchange reserves.
Central banks set interest rates to achieve their economic goals and facilitate trade.
The value of your local currency is also set by the central bank through the massive purchasing and selling of foreign currencies.
90% of the trading volume on the Forex market is contributed by speculators.
Forex market players come in all shapes and sizes; with some backed by a fund while some others just in toe-deep. While it’s impossible to track all the activities and sentiment of these speculators, they leave behind footprints.
Their footprint is PRICE.
Just like any team sports, a single tweak by any of the major players in the currency market can result in a significant move even though 90% of the market participants are speculators.
You are moving in the right direction by knowing the big players in this huge market. Keep it up!
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