Forex Trading Basic

Forex Market Participants and Retail Forex Traders

Pivot Point Break Out Strategy in Forex Trading

Retail Forex traders are Forex market participants- that doesn’t mean they are the only participants in Forex market. In fact, retail Forex traders are a fraction of the total network of forex market participants. In this article we are going to highlight these facts and try to provide a clear idea about all forex market participants and their impact on the market.

Forex Market Participants

The Forex market is basically an international trading market that directly works as an OTC between two parties. Unlike futures markets and shares, The Forex market is a decentralized and self-regulated market that has no central office for exchange or clearing house. This structure eliminates any fees derived from exchange and clearing, so that it reduces transaction costs.

Types of Forex Market Participants

Foreign Exchange market is made up of different members, depending on varied needs and interests, operating directly between them. These participants can be divided into two groups:

  • The Interbank market
  • The Retail market

Forex Market Participants

The Interbank market

The interbank market is responsible to designate Forex transactions that occur between central banks, commercial banks and financial institutions.

Central Banks

Central banks of the countries (such as the Federal Reserve System or the European Central Bank) play an important role in the Forex market. As principal monetary authority, their role consists in achieving price stability and economic growth. These Banks also manage foreign exchange reserves of the country that can be used to influence market conditions and exchange rates.

Commercial Banks

Different Commercial banks (such as Deutsche Bank and Citibank) provide liquidity to the Forex market due to the volume of commercial operations that handle day. These operations include the conversion of foreign currency based on the needs of customers while some are held for speculative purposes negotiating table owned by banks.

Financial Institutions

Finance managers, investment funds, pension funds, brokerage firms etc. Financial institutions are operating with foreign currencies as part of their obligations in order to find the best investment opportunities for its clients. For example, a manager of a broker or securities and international actions will have to engage in foreign exchange transactions for the sale of foreign operated there.

The retail market

The retail market enables the transactions between small speculators and investors. These transactions are executed through Forex agents who act as mediators between the retail market and the interbank market. The members of the retail market are hedge funds, corporations and individuals.

Hedge Funds

Private investment funds that speculate in various assets classes using leverage are called Hedge funds. Macro Hedge Funds aim to seek business opportunities in the Forex Market and design and execute operations after making a macroeconomic analysis to examine the challenges affecting a country and its currency. Because of their high liquidity and their aggressive strategies, they are considered a major contributor to the dynamic Forex Market.


Large companies engaged in the import and export activities with their counterparts in foreign currencies. Its main business requires buying and selling foreign currency in exchange for goods, exposing them to risks. Through the Forex market, they convert currencies and cover themselves against future fluctuations.

Individual Traders

Individual traders are one of the prime concerns in Forex Market. These Individual traders or investors are the Forex traders who trade with their own capital to profit from speculation on future exchange rates. Mainly they operate through Forex platforms that offer accounts with low spreads, immediate execution and highly leveraged margin.

All these participants have a great influence on Forex Trading Fundamental analysis 

Who are Individual private traders?

Forex Market ParticipantsThe Forex trading we are going to discuss in all the upcoming articles is dealing with individual private traders. These traders are responsible for between 70% and 80% of transactions in the Forex market. These exchanges are made to take advantage of the volatility of prices and thus obtain a financial return. Retail Forex trading has been growing year by year thanks to the development of information technologies and the growth of brokers who specialize in investors.

A retail broker helps private investors and traders to get access in the Forex trade and earn a return on their investment. Small investors often use leverage for superior performance, however, the risk of capital loss increases considerably with increasing leverage.

So, Choosing Forex broker intelligently is one of the most important task of Forex traders.

Here you can get reviews of some of the quality brokers: Forex Broker Review

We can classify the traders in the following groups:


They are the new comers in this arena who are seduced by advertising and the expectation of large profits in the short term. They use too high leverage. While many make profits in the short term, most get lost in the long run. In general it is novice and sees their trades more like investment bet. Their accounts are usually of small sizes, between $ 100 and $ 1000. There are a lot of traders of this type.

Big traders:

These are the traders who take the Forex trade as a serious investment and have large accounts. The typical large trader has invested much time and money in education and has extensive experience in Forex trading. Knows a lot about the operation of the Forex market and has a high demand on when the service offered by brokers.

Strategies Programmers:

Strategy Programmers use their skills by analyzing the market for patterns of behavior and develop automated trading strategies exploit patterns automatically looking to make a profit. These strategies generally rely on just one currency pair and often use oversold or overbought indicators or traded in specified times. Purchase orders and sales are common: several times a day or several times a week. While not seek a lot of pips of profit on each trade, its high frequency makes this strategy volatility is high.

Copy Traders:

Copy traders are traders with limited knowledge. They don’t have analysis skill so that they follow other traders and analysis and trades based on them. They often copy the trade decisions made by the experts. But they still see the Forex trade as a serious investment is therefore looking to gain a performance advantage of the ability to copy the trades other more experienced investors. This class of investors has had tremendous growth in recent times. On average, traders who copy other investors get better performance than operating on their own.

Forex Market Participants


Chapter 1Introduction to Forex Trading
Lesson 1online Forex trading
Lesson 2Forex Market Overview
Lesson 3Forex Market Participants
Lesson 4Forex Trading Hours
Lesson 5Forex trading advantages

Go back to Main Page: Forex Trading for Beginners

About the author

Md Chhali Uddin

Md Chhali Uddin is a Renowned Financial Analyst. He is also involved with as a writer and financial Analyst. He is a brilliant Financial geek with vast experience in every sector of Currency Trading.

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