Candlestick Trading Blog
July 1, 2009
FX Trader
| FX Trader Types When dealing with the forex market, also referred to as the FX market and the foreign exchange market, there are many types of FX traders and market participants. The forex market is the largest and the most liquid of the markets and is available for trading twenty four hours per day. In today's article we discuss the different types of market participants that practice trading in the forex market. Hedgers – this FX trader practices hedging against movements in forex exchange rates or exchanging currency in order to fund international transactions. These are some of the biggest clients of banks and other large institutions (other market participants explained below). Hedgers aim to reduce the uncertainty of the foreign exchange risk through hedging strategies in order to lock in specific exchange rates for the future or to remove risk for the transaction. They are various ways that they do this. Speculators – this type of FX trader aims to make money by taking advantage of fluctuating exchange rates levels rather than to hedge against movement in exchange rates or exchanging currency like hedgers. In fact, some of the largest speculators that participate in this type of forex trading are hedge funds. These hedge funds are unregulated and are quite controversial. They act similar to mutual funds and allow investors to invest large amounts of money that inevitably affect a country's economy and therefore their currency. Central Banks and Government – central banks are involved with the manipulation of reserve volumes in order to meet economic goals which ultimately affects foreign currencies and their value. These central banks often (depending upon the country and currency) act in tandem with government in order to balance inflation and keep interest rates low in order to increase economic growth. Banks and other types of financial institutions – banks are some of the largest participants involved with forex transactions. In fact, banks act as dealers in that they can buy currency and sell currency at the bid/ask price. They will often exchange currency at a premium to the price that they paid to obtain the currency in order to make money. Banks also have somewhat different exchange rates as well for the same currencies since it is a decentralized market. The above information should provide you with basic information regarding the type of FX trader that exists as well as a little information about the forex market in general. Continue your forex trading education and see if this market works for you. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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