Part 4: Who Trades on FOREX?
Before the late 1990s, traders would have to have between $10 million and $50 million to open
a trading account. The market was originally intended to be used by large companies and banks, but
when the Internet became widely available, small traders, also referred to as retail traders, were able
to access FOREX trading online. There are still four major players on the FOREX market today.
1. Big banks. The biggest banks in the world determine the exchange rates on the market.
They set the bid-ask price that brokers must pay per transaction.
2. Big companies. Companies that operate on a global scale exchange on FOREX because
they have to exchange their local currency into foreign currency before they can do business
in the foreign country.
3. Governments and central banks. As with global companies, governments and central
banks trade on FOREX as part of their operations. Central banks can cause fluctuations
in the market when they adjust interest rates.
4. Speculators. Almost 90 percent of all trades are executed by speculators. Their goal is to
make as much money as possible on the fluctuations in the exchange rates.