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Major and Minor Forex Participants Every Trader Should Know

Maya Mandzikasvili | Feb. 7, 2019
Major and Minor Forex Participants Every Trader Should Know

February 7, 2019, | AtoZ Markets - Unlike the stock or precious metal exchanges, the Forex market is not unanimous and centralized. Instead, it is built on the banking system, and national and large international banks provide the basis for the market. Each operation ultimately passes through those banks, which gives them great power and influence.

Forex concept appeared in the early 1980s

The name of the foreign exchange market means "currency exchange" (FOReign EXchange). Small amounts are not converted in Forex, therefore, it was and remains, above all, the interbank foreign exchange market. Since participants of the Forex are inherently unequal, it is important to know the major and minor players and their influence on the currency exchange market.

Forex as a concept appeared in the 1980s when the gold standard was abolished, and the world needed to exchange currency. The original version was a large interconnected network of the national banks that processed orders on behalf of their clients. There was no trade, only currency exchange for the needs of foreign trade. After international banks joined the Forex market more companies started to use Forex. Some of the global corporations have even installed their own Forex terminals in order not to depend on the banks.

Major Forex players

Among Forex participants are central, investment and commercial banks, dealers, brokers, various funds, insurance, and large multinational companies. National banks, international banks, and global corporations are the three main players in the Forex market. Each major player has enough influence alone to change the financial situation on most currency pairs.

Profit is not the final goal for the Forex player. This is explained by the fact that the volumes that they can receive in Forex are insignificant compared to their profits. The main players - national banks, international banks, and global corporations - seek to influence the price in their favor.

Minor Forex participants

By the 1990s, it became apparent that the amount of currency in Forex, as well as its high volatility, provide ideal conditions for trading. The new discovery caused an influx of opportunistic traders into the Forex market. Opportunistic traders proclaim themselves to be an interactive community that helps other traders of all levels across all asset classes become more informed and more consistent. However, not all of them were influential enough to afford membership - and yet they were willing to pay for it.

Minor players - investment funds, brokerage companies, and private traders - use the movements created by the main players and trade them. Investments and hedge funds, brokerage companies and private traders are minor participants in the Forex market. Their Forex trading strategy is based on profit maximization. However, a large group of small players may accidentally influence the market when they combine their influence

Forex trading goes online in 1996

When the first online trading platforms began to appear, the Forex supporters started to think about introducing online Forex trading platforms. The first version of Forex based software was presented in 1996. Since the online trading platform introduction, everyone could trade in Forex. Although the trader had to pay $ 6,000 for a terminal and $ 300 for a transaction.

Forex was flooded with investments and hedge funds and small traders remained dissatisfied, as not all of them could afford to support their banking terminal. Ultimately, Forex brokers became the main gateway to Forex for private traders. In addition to the terminal access at Forex, brokers provide traders with options for leverage, technical analysis and other forms of support. However in the last decade many scammers appeared among brokerage companies, which made global financial authorities to tighten supervision of the brokers.

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Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ, nor should they be attributed to AtoZMarkets.