It might not surprise you to know that the only people that were supposed to make money off of forex were the “big guys”. The same way that the internet made data and content available to people worldwide – it did the same for the forex market. Before the 90s, you actually had to have millions to even qualify to trade in the forex market, and not just one or two. Specifically, you had to have somewhere between ten to fifty million dollars to start with, and hedge funds and banks had the market cornered. Now, that has all changed! However, that doesn’t change the fact that the big guys are still important. Here’s the breakdown:
At the end of the day, currencies and banks are intertwined forever, so they truly are, on some level, the foundation of the forex market, even though it might be structurally decentralized. These are the entities that determine the exchange rates, which can affect the market tremendously. They are often responsible for the bid/ask spread, and given how large banks are, and how many customers they have, a large portion of the trading activity comes directly from them. For those who are unsure, some examples of super banks are banks such as HSBC, Barclays, JPMorgan, Citi, and more.
Large Commercial Companies:
It’s not as though banks are the only ones that need to be interested in currencies and their exchange rates. There are more global and interconnected companies than ever before, that might manufacture in a whole different continent than they mainly sell their product. It doesn’t matter whether it’s a retailer or a giant tech company like Apple, that has over $100 billion in cash – they certainly are keeping their eye on what the forex market is doing, because it is in their best interest. They certainly might not trade as much as the banks, but they are there, and they are a factor
Governments and Central Banks:
Yes, of course, governments have reserves, and they too, are involved in the market, whether it’s for international payments, their own operations, or their own foreign exchange reserves. Central banks also control inflation, which obviously affects the market, as well. We all know that inflation can have a direct influence on price, and can even work to massively buy or sell certain currencies to keep the market “stable” as they see it.
The speculators are the ones in it for a profit, and there are a lot of them. This includes everyone from the billionaire throwing their weight around and trying to profit millions every day, to the college student trying their hand at the market so that they can have dinner money for an upcoming date. They are in it to make money, and profit as much as possible.