The forex market is the largest financial market in the world by trading volume. Every day currencies valued at approximately 3 trillion dollars are traded. This means that a trade of one million dollars is not even scratching the total daily volume of the forex market. A volume so big is created by many traders and institutions, each of them with a different intention.

Central banks are big players in the forex market. The purpose of central banks, like the Federal Bank of the United States, is to keep the economy and currency of their country stable. They do it with the interest rate decision and trading the currency market. Most central banks are active traders in the forex market, mainly to stabilize their currency and have a sufficient foreign currency reserve if the need for it ever arises.

Commercial banks are the main part of the forex market. These banks carry out the trades by other traders. This action requires them to exchange currencies with one another according to their clients' needs. The commercial banks also trade contracts for their own profit and speculation. When banks believe that one currency will rise over the other, they perform the appropriate trade to make sure they profit from it. Since commercial banks control most of the money in the world, they are the one of the largest parts of the forex market.

Importers and exporters are also a crucial part of the forex market. Since these companies work with countries other than their own, they also work in different treaties around the world. Their main activity in the forex market is to exchange money from their currency to their client's currency and vice versa. They also use the currency market to "lock" an exchange rate and guarantee a certain profit. This is done to avoid the impact of fluctuations in exchange rates and guarantee a future profit.

Private speculators, including private citizens, hedge funds, and other non-regulated or little-regulated institutions also make up a big volume of the forex market. Usually they are not trading to do international business or stabilize an economy, but rather to make a profit for themselves or their clients. Their trades are being transported by commercial banks.



Source by Nadav Snir