Let’s talk about the variety of trading pairs and who are trading them. Mostly traded currencies are the U.$. Dollar, The €uro and the Japanese Yen. A few other popular trading currencies are the British Pound, the Australian Dollar, the Swiss Franc, Canadian Dollar and the Swedish Krona. You can trade them in every pair that you can think of. But hold on… What is a pair? We all know you need two to tango right? The same is with Forex. The whole basics of the market is to buy and sell a certain pair. For example the EUR/USD is the most popular pair. But you can also trade the GBP/SEK. This is the British Pound dancing with the Swedish Krona.
Now you have a good understanding of the currencies and the pairs. What else do we need to know? Who are all the players involved? Earlier I summarized them already for you but let’s zoom in a little bit more on the players on the market:
The corporate and bigger banks are responsible for give or take 50% of the transactions made at the Forex market on a daily basis. Banks are the biggest players at the Forex market. We call this INTERBANK MARKET.
In other words. I’m talking about the Foreign exchange between banks and financial institutions. Some of these trades are made by costumers, but this is just a small part. The majority of these trades are made for own purpose. Because, let’s face it. A bank has money and wants to make more money so they invest, part of these investments are trading at the Forex market.
- -Investment funds and investors.
Second biggest players are the investment funds and investors since they have access to a large amount of capital which they can trade with. They simply manage collected funds from their clients. Off course you understand the bigger the amount the more revenue could be made.
Another important part of the Forex market are companies all over the world. For example: A German car producer imports American parts to sell the cars in England. How many Forex trades do you think are made in this simple and short example? The right answer is 2. GBP are traded with the EUR and the EUR with USD.
- -Central Banks.
Another big influencer are the central banks. Central banks are used to manage a certain country or region. Think of the European Central Bank (ECB) or Bank of England (BOE) or the Federal Reserve of the United States. Central banks are responsible for fluctuations and the interest rates.
- –Small traders and small investors.
When we talk about small traders, we are talking about you and me. The traders who trade from their comfortable homes on their own accounts. As you can imagine, our influence on the Forex market isn’t big at all, but does it have to be big? As long as we get a small piece of that big pie I walking about earlier right? With the ease of modern day technologies and the supply of all the online platforms the amount of small time traders is rapidly growing.
To be a successful trader you are facing one of the toughest challenges of the world. It is all about being mentally tough and strong, since trading might be 80-90% mentally and emotionally. The hard truth is that maybe 5-10% of the traders will make it. After you’ve red this course you have made your first step towards being a successful trader. I’ll tell you more about the different strategies and risk management later on so stay tuned!