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Who Are Forex Market Participants

In the past until the late 90s, those who did forex business were jetsets or wealthy people called the "big boys", large financial institutions such as central banks, private and government banks, as well as large commercial companies such as Apple or Toyota. People who buy and sell forex are called traders.

 But after the development of the internet around the world in the late 90's, the forex market was finally able to be entered by almost all individuals, from entrepreneurs to housewives, young and old. Forex is also traded on a retail basis to individuals through brokers. Well, here is an outline of the major market participants:

Super Banks Because the forex spot market is decentralized, the parties who are entitled to determine interest rates in the world are the largest banks. Using the demand and supply of currencies, it is they who generally determine the bid or ask spreads we love (or hate to death...). These banks are collectively known as interbanks. For example, UBS, Barclays Capital, Deutsche Bank, and Citigroup. That said, the interbank market is the forex market itself.

Large Commercial CompaniesCompanies take an active role in the forex market with the aim of doing business. For example, Apple, which has to convert US Dollars into Japanese Yen when buying electronic devices from Japan for their products. Another company that influences currency movements is a merger and acquisition (M&A) company that is between two or more large companies.

Governments and Central Banks Governments and central banks (such as the European Central Bank, Bank of England, Bank of Japan, and Federal Reserve) are often directly involved in the Forex market. Their involvement is similar to that of a commercial company making international trade payments and handling currency exchange.

Meanwhile, central banks have a role in determining the forex market, especially when they adjust interest rates to control inflation. The action of a central bank, which changes interest rates, will affect the value of a country's currency. There are times when banks intervene, either directly or through statements, to change their interest rates.

Speculators The purpose of speculators, who can also be classified as traders in general, is to pursue forex trading, of course, to win transactions. With almost 90% of the total trading volume, speculators enter the world of forex in various forms. No, here we will not find various human forms like in the Lord of the Ring films, but various forms of pockets.

Sometimes speculators enter the Forex market with pockets full of money, sometimes just a little, but what all these speculators have in common is that they come to make big profits. And maybe we will be one of the speculators. Well ... at first we may be classified as speculators with a small amount of capital. But over time with the capital of perseverance and thoroughness, we will become one of the speculators with thick pockets.

The "Bretton Woods System" is an agreement that regulates the exchange rate of all currencies against gold. For some time this system was able to stabilize the exchange rate. Until one day the world's major economies began to develop and change at a completely different pace. The market at the time felt the "Bretton Woods System" was too outdated and restrictive.

Finally in 1971 the "Bretton Woods System" was abolished and replaced with another exchange rate system. The currency market slowly began to evolve and move freely with the United States in control, where the exchange rate was no longer determined by standard, but by following a simple economic system: demand and supply.

Accustomed to a rigid Bretton Woods system, at first it was difficult to determine the exchange rate, but as technology developed, the market was finally able to determine the exchange rate of one currency for another, or with gold, with ease.

The development of the global economy has then led the world to a development where people can participate in a world that was previously dominated by large banks and international companies. Now there are many "retail forex brokers" that serve currency trading for the public on a small scale. Compared to the interbank market which has a standard trading size, this retail broker allows the public to trade even with a trading size of 1000 units. In general, brokers are divided into two:

ECN is a term for a trading platform that will automatically follow the price of a pre-determined consumer buy or sell order. The price is determined from some information gathered from market makers, banks, and even traders who use.