Forex trading markets can be defined as markets in which foreign currency is bought and sold. It is the largest and most liquid financial market in the world.
Its participants consist of large multinational banks, central banks in different countries, institutional investors, currency speculators, corporations, governments, other financial institutions, and retail investors. We’ll discuss more details on Forex Trading markets here.
The market includes the sale of foreign exchange futures and options. This has grown very rapidly over the years and reached $166 billion in April 2010.
Forex trading has grown by 20% over a three year period from 2007 to 2010. It has also more than doubled since 2004. This increase is due to a number of important factors.
Specifically the use of electronic trading through online portals has made it much easier for retail traders to participate in this market and has accounted for up to 10% of the Forex spot turnover (or $150 billion per day) in 2010.
As indicated earlier, there are many participants in this market both large and small. Let’s discuss some of the key players involved.
As opposed to a stock market, a Forex market is divided into levels of access. At the top of this market is the inter-bank market which is made up of the largest commercial banks and securities dealers.
The level of access to the Forex market is largely dependent on the size of the “line” (which is the amount of money which is trading). The top interbank transactions account for over 50% of the market total.
Other participants can include large hedge funds and some of the larger retail Forex market makers. These are the players which cater to individual online investors and which have grown substantially in recent years.
Pension funds as well as insurance companies, mutual funds and institutional investors also play a very important role in making the Forex market the largest and most dynamic financial market in the world.
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