Let’s look at the many types of trading pairs and who trades them. The US dollar, the Euro, and the Japanese yen are the most often traded currencies. The British Pound, Australian Dollar, Swiss Franc, Canadian Dollar, and Swedish Krona are some additional prominent trade currencies. You may exchange them in any pair you can imagine. But wait… What is the definition of a pair? We’re all aware that it takes two to tango, right? The same may be said for Forex. The fundamentals of the market are to purchase and sell a certain pair of currencies. The EUR/USD, for example, is the most common currency pair. You can, however, trade the GBP/SEK pair. The British Pound is now dancing with the Swedish Krona.
You now have a firm grasp of the various currencies and pairings. Is there anything else we need to know? Who are all the actors in this scenario? We previously described them, but let’s take a closer look at the participants on the market:
The financial institutions
On a daily basis, corporations and larger banks are responsible for almost half of the transactions done in the Forex market. The Forex market’s major players are banks. This is referred to as the INTER-BANK MARKET.
To put it another way, we are referring to foreign currency transactions between banks and financial entities. Customers make some of these deals, but they only make up a small portion of the total.
The majority of these transactions are conducted for personal gain. Because, let’s face it, that’s a fact. A bank has money and wants to make more, so it invests, with one of those investments being Forex trading.
Investors and investment funds
The investment funds and investors are the second-largest participants, as they have access to a huge quantity of cash with which to trade. They only manage the cash that has been gathered from their clients. Of course, you realize that the larger the sum, the more money that may be produced.
Companies from all around the world play an essential role in the Forex market. For example, a German automaker imports American parts in order to sell vehicles in the United Kingdom.
In this basic and short example, how many Forex deals do you believe are made? The correct response is 2. The GBP is traded against the EUR, while the EUR is traded against the USD.
The Central banks
Central banks are another major player. Central banks are institutions that are in charge of managing a country or area. Consider the European Central Bank (ECB), the Bank of England (BOE), or the US Federal Reserve. The interest rates and fluctuations are the responsibility of central banks.
Small traders and investors are the focus of this article.
When we talk about small business owners, we’re referring to people like you. Traders who trade on their own accounts from the comfort of their own homes.
As you might expect, our effect on the Forex market isn’t huge, but does it need to be? So long as we receive a tiny slice of that enormous pie mentioned earlier, right? Because of the accessibility of contemporary technology and the abundance of online platforms, the number of small-time traders is quickly increasing.
To be a very successful trader, you must overcome one of the world’s most difficult obstacles. Because trading is 80-90 percent mental and emotional, it’s all about being psychologically tough and powerful. The harsh reality is that just around 5-10% of traders will succeed.
You’ve taken the first step toward becoming a successful trader after reading this course. Later on, we’ll go into the various techniques and risk management, so stay tuned!