Barking away at the top of the Forex dog-pile are banks, of course. Surprised? Bank trading takes up a huge share of the Forex market, with bank transactions accounting for over 50% of all Forex transactions. Makes sense, right? Banks are loaded-- they have access to enormous amounts of international currency, and can use the Forex market to make money, entice stock investors, and improve conditions for their customers.
Banks often trade on behalf of their customers, and most of these trades are made with other banks all over the world. This is called inter-bank trading, and accounts for billions and billions (and billions!) of dollars of daily trading. Makes you feel a bit small, doesn't it?
2. Commercial and Multinational Companies
Unlike the Forex players who participate directly with the Forex market, commercial and multi-national companies do it through the exchange of goods and services all of which can be exchanged in different currencies. And even if they don't have their finger directly in the pie, so to speak, multi-national companies are hugely important players on the Forex market and they make an enormous contribution to the amount of money traded daily on the market. Think of it this way: the main reason we have a foreign exchange market in the first place is global trade. And it's the companies who are actually involved in the trade of goods and services that keep the global economy moving.
3. Central Banks and Governments
On the next level down you'll find central banks and governments. These entities set monetary policies, such as interest rates, that play a very big part in the Forex market. Interested in more than just making a profit, central banks control things like inflation and money supply within their country in order to stabilize the local currency. The largest and most prosperous central banks are in London, Tokyo, and New York.
4. Financing Companies
Financing companies, such as mortgage and credit card companies, tend to use the Forex market similarly to banks, but on a smaller scale. Financing companies trade on the Forex market to encourage investment in their shares, but unlike banks, don't generally pass any opportunities for investment on to their customers. No surprise there after all, they're credit card companies, right?
5. Retail Forex Brokers and Private Speculators
Down at the bottom of the pile? You and me. We're the ones who participate in the Forex market on a smaller scale, making money by taking advantage of the movement of a pair of currencies.
