Forex transactions are lucrative options to garner profits for individuals, institutional investors, and other additional forex market players. The forex market is a decentralized, self-regulated yet over-the-counter (OTC) international market. The market has a myriad of levels, each with varying determinants and different players. A lot depends on how people new to forex market structure are educated about the vagaries of the market.
The Central Banks
The OTC market is well connected and remains active throughout the day. The markets are controlled holistically by the central banks. Importantly, the nation’s central banks ensure that the market is not dysfunctional in any way, as they are associated with lower economic growth. The national money supply gets regulated, interest rates settled, and thus market conditions are influenced by the central banks.
Financial Institutions and Banks
They are considered primary market movers. Massive transactions determine the exchange rate. Commercial banks like Barclays and Deutsche Bank have sumptuous trade volumes and hence higher liquidity. The financial fraternity comprises astute fund managers; hence, they are obliged to provide well-maximized returns.
Forex Broker – A Middleman
Forex Broker is a top-notch forex market player or a middleman, existing between foreign exchange bank and clients’ bank. The contacts are often very close and may emerge beneficial in building a good client base for the respective banks.
How do companies gain from Forex trading?
A myriad of companies are involved into deals that are affected by the currency movements most of them are involved in export/import! By virtue of forex markets, returns can be maximized, hedging can protect companies against impending future fluctuations.
Individual traders analyze and trade on the premise of speculated profits notched up from future exchange rates. Spreads are tightly available, and execution is immediate. Apart from individual traders, there are speculators who participate in the forex market structure. Individual investors or traders trade Forex, with their capital to profit from speculation on exchange rates.
In the realm of hedge funds, analysis states that the largest speculators are hedge funds. They are one of the biggest clientele. Hedgers try to offset the uncertainty of the exchange rate movements by entering the spot market and simultaneously entering into another transaction to purchase the currency that they need.