How does the Forex market work: the key players

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How does the Forex market work: the key players

Category : Robots

The Forex market is an interbank currency market, because not only traders are interested in it, but also all the banks. It’s arranged quite simple. There are different currencies that traders can trade.

For example, there is the Euro currency and the American dollar. Between themselves, they constitute the EUR/USD currency pair which price can grow or fall. If many market players buy the euro, the EUR/USD price will grow. On the contrary, if many players buy the dollar, the EUR/USD price falls. The traders earn their profit on the buy/sell difference. On this basis, the FIX API Forex market acts by the economic law of demand and supply. Moreover,  $5 trillion worth of trade is made there every day.

No financial market can exist without its main participants. These include:

  • Exchange sites;
  • Banks;
  • Brokers;
  • Traders.

The exchange site is the key player in all financial markets. Without the exchange sites, the markets themselves would not be possible. The exchange site, simply put, is the place where currency buyers and sellers meet. FIX API Forex is essentially an exchange site that can be accessed without leaving home through certain trading platforms. Also in place of an exchange site can act  banks that provide quotations (that is, work as liquidity suppliers) to brokerage companies.

The bank is the biggest player in the exchange market, as the most common currency exchange is committed by the Central bank and other currency exchange banks. The average volume of the trade transaction is $5 million.

Brokers are intermediaries that accept buy or sell orders from FIX API traders and redirect them instantaneously to the market. For example, imagine if they weren’t exist. Then we would have to look for those who will sell some of the instruments we want to buy. Thanks to the broker, the trader doesn’t have to do this.

The trader is a professional member of the market who commits trade transactions. Each trader has their own approach to work. Some like to work every day conducting hundreds of deals, some open only one deal for a week, and so on. The main classification of the traders is by their trading strategy and transaction hold  period. Therefore, it makes sense to classify traders as:

  • Scalper;
  • Intraday trader;
  • Position trader;
  • Medium-term trader;
  • Long-term trader;

  1. “Scalper” is the type of trader that commits a huge amount of transactions in a short period of time. The main task of a scalper is to net the profits of a couple of points from the movement. This type of trader is gradually being phased out because of improved bidding. Predicting the full potential and taking the maximum benefit with the minimum risk is quite difficult to a market newcomer, and so there is algorithmic trade to help the trader.
  2.  An intraday trader is the type of trader that commits transactions of one day duration. The main task of such FIX API trader is to net the profit before the end of the trading day. The main motivation is the reluctance to leave deals open, for example, overnight. If you want to go to bed every day with a clear mind, this type of trading is just for you. This type of traders is the most common in the FIX API Forex market. The fact is that approximately 55 to 60 per cent of the total trading at the exchange site is carried out by this type of traders. The average capital size though is the lowest among all types of traders.
  3.  A position trader is the type of trader that engages in transactions that last several days. Most often, the transactions are closed before the weekend. The main objective of such traders is to net the profit in time of the most active market price movement.
  4.  A medium-term trader is the type of traders that can open several transactions throughout the year. Often, the duration of such a trader’ transactions is at least a week.
  5.  A long-term trader is the type of trader that often makes a deal for up to a year and even more. The main characteristic of this type of trader is looking at transactions as investment in certain currency pairs. Such traders are most likely to become investors.

These are the key players in the FIX API Forex market. To be successful in trading, you need to know each link that connects the market together. This will make it possible to become more professional and optimize trading.

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