How do big banks trade the Forex market? Forex trading is all about exchanging one currency for another countries’ currency. It is the biggest trading financial market in the world and used to be only accessible by big banks and corporations who had the huge amounts of capital to speculate on currency fluctuations. Trillions of dollar exchange hands daily on this market.
1. What is the Purpose of Trading the Forex Market?
The purpose of currencies trading is not necessarily for profit. It is so that international businesses can transact and also as a way for banks and other institutions to hedge themselves against the possibility of currency debasement. However today, any small investor can invest and trade in Forex because of an increasing number of online brokers offering better and better terms for small investors today.
2. How Do You Make Money from the Forex Markets?
In order to profit from this type of trading activity, one needs to have extremely good discipline. The trader needs to understand what causes a currency to gain or lose against other currencies and use this knowledge to buy or sell just before the anticipated move.
3. So How Do Big Banks Trade the Forex Market?
Banks are able to make money consistently because they know generally how different currency pairs move during different times of the day. Currencies are being traded 24 hours a day consisting of the Asian, European and North American sessions. Moving from session to session can sometimes generate highly predictable changes in volatility and volume in specific currency pairs. This knowledge is used by big banks to capitalize and make money from currency fluctuations.