Who Trades Forex?

This might seem a very simple question with an equally straightforward answer – the people who trade Forex are Forex traders.

End of discussion. But in fact currency exchange or trade is such a widespread activity carried out, consciously or sub-consciously by so many different people in a wide variety of ways.

Let’s start with the consumer abroad. Once you are away from home and you go shopping or pay for travel or accommodation you are playing a part in the Forex market because you are exchanging currency – because you need to pay in the currency of the country you are in. Assuming you are using a credit card the cost of your purchase will be determined by the exchange rate in place at that particular time. Now you may be talking about the cost of a meal or a few nights at a hotel but multiply that out by millions of travellers each year the number of such trades is going to be very high indeed.

Any business, any company who buys or sells products, services or raw materials abroad is very much part of the Forex market. Most companies will not act in the more or less haphazard manner of the tourist. Businesses who are for example buying in components or trading in any way outside their own legal jurisdiction will inevitably have to convert significant amounts of money back and forth in order to perform their transactions. They will do their own reading of the markets and their fluctuations to choose the right moment for trading because they will need to have enough liquidity of cash flow to enable them to buy and to sell. Timing can mean everything because choosing the right moment to buy or to sell currency for business purposes can have a major effect on a company’s balance sheet and the size of its profit – or loss.
We then of course come to the people for whom trading as such is their main form of income, rather than those for whom it is incidental as previously described. Obviously there are no hard and fast demarcation lines; any entrepreneur might be looking trade over and above that which directly affects his own company.

Then there are the traders looking chiefly at the Forex market as a means of investment, choosing the right moment to buy or sell and then to salt the money away for another day. Investment managers are “big” in Forex as well because if one of their major clients is in the market for buying foreign securities or futures they won’t be able to get far without foreign currency.
And finally come the small, individual Forex traders. Large in number but probably in relation to the big institutions and corporate dealers, quite small fry. But that doesn’t mean that the small guy can’t so well but not without research, training and a real effort to understand the market. Sure there is money to be made but not without great risk.

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