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The purpose for companies in Forex is to do business such as paying for goods & services, hedging their exposure to currency fluctuations, & managing the cash flow.
Since the volume they trade is much smaller than those in the interbank market, this type of market player typically deals with commercial banks for their transactions.
Mergers and acquisitions (M&A) between large companies can also create currency exchange rate fluctuations.
In international cross-border M&As, a lot of currency conversions happen that could move prices around which still have a significant impact on the market.
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When it comes to forex trading, commercial banks and financial institutions are the movers and shakers.
Since the forex spot market is decentralized, it is the largest banks in the world that determine the exchange rates.
They’re responsible for most of the daily trading volume, and t...
The participants in the FX market can be organized into a ladder.
At the very top of the forex market ladder is the interbank market.
Composed of the largest banks in the world, the participants of this market trade directly with each other (“bilaterally”) or through voice or electro...
Speculation in the forex market involves the buying and selling of currencies with the view of making a profit.
Speculators are focused on price fluctuations.
It is called speculation because of the uncertainty involved since no one can know for sure whether a currenc...
These are individual traders who trade currencies from their home computers, smartphones, or tablets.
They may not have the deep pockets or sophisticated tools of the big players, but they’re a growing force in the forex market.
They may not move the market like the big players, but t...
The early 2000s saw an explosion of online brokers, each eager to offer retail FX trading services.
The increased competition among brokers led to tighter spreads, lower trading costs, and an expansion of trading products beyond major currency pairs.
Today, retail FX traders have acce...
Once the 1990s came along, thanks to computer nerds and the booming growth of the internet, banks began creating their own trading platforms.
These platforms were designed to stream live quotes to their clients so that they could instantly execute trades themselves.
Meanwhile, some sm...
It is essential for you to understand the nature of the spot forex market and who are the main forex market players.
Forex was originally intended to be used by bankers and large institutions, and not by us “little folks.”
However, because of the rise of the internet, online forex bro...
ELPs are specialized firms using advanced technology and trading algorithms to provide liquidity to market participants.
Examples of ELPs are Citadel Securities, Flow Traders, HC Tech, Jump Trading, Virtu Financial, and XTX Markets.
They operate as in...
Hedge funds and prop firms are known as the “smart money” in the forex market.
These savvy traders use advanced strategies and advanced analytical tools to make educated bets on currency movements.
They’re not afraid to take risks, and they often employ leverage to make their bets eve...
By its very nature, the stock market tends to be very monopolistic. There is only one entity, one specialist that controls prices.
All trades must go through this specialist. Because of this, prices can easily be altered to benefit the specialist and not traders.
In the stock market, ...
The growth of retail FX trading attracted the attention of financial regulators, who sought to protect individual traders from shady forex brokers and maintain market integrity.
They introduced strict rules & requirements for FX brokers, making sure they had enough capital,...
Retail FX trading emerged in 1970s after the Bretton Woods system, which had pegged global currencies to the US dollar, was dismantled in 1971.
The resulting shift to a floating exchange rate system paved the way for increased currency speculation and the birth of the modern foreign exchang...
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