The Main Players In The Forex MarketWhen the US Dollar went off the gold standard and began to float against other currencies, the Chicago Mercantile Exchange began to create currency futures to provide a place where banks and corporations could hedge the indirect risks associated with dealing in foreign currencies.
More recently, currency gyrations have centered on a massive move away from currency futures to more direct trading in the Forex spot markets where professional currency traders, alongside with forwarding contracts, derivatives of all kinds, deploy their various trading and hedging strategies.
The idea of currency speculation has been actively marketed, and this is having a profound effect on the foreign exchange planning not only of nations - through their central banks - but also of commercial and investment banks, companies and individuals. These are the main categories of participants - a geographically disperse Forex clientele - and as a consequence so is the market as a whole. In practice, the foreign exchange market is made up of a network of players clustered in various hubs around the globe.
The key difference among these market participants is their level of capitalization and sophistication, where the elements of sophistication mainly include: money management techniques, technological level, research abilities and level of discipline.
Among the market players it is the individual trader who has the least amount of capitalization. In the absence of this strength, besides of emulating those other elements of sophistication of the institutional players, individual traders are forced to impose discipline on their trading strategies.
Those who can impose discipline will gain the ability to extract positive returns from the Forex markets. fxstreet.com
What is a market maker? To be considered a foreign exchange market marker, a bank or broker must be prepared to quote a two-way price: a bid price which is the market makers' buying price and an offer price is their selling price to all inquiring market participants, whether or not they are themselves market makers.
Market markers capitalize on the difference between their buying price and their selling price, which is called the "spread" . They are also compensated by their ability to manage their global FX risk using not only the mentioned spread revenues but also netting revenues and revenues on swaps and conversions of residual profits or losses.
The exchange rates can be declared through foreign exchange dealers across the globe over the telephone or electronically via digital dealing platforms. next