Forex glossary of terms
Major forex participants
The major participants of a Forex market are:
The majority of exchange transactions are conducted through Commercial banks. Even seemingly autonomous participants in the exchange market utilize accounts that belong to them at the banks where they go on to carry out pending transactions of conversion. Banks, through their transactions with clients, are able to answer the needs of forex via their taking and distributing of money, bringing the money into new banks.
Another major participant are exchange markets. Exchange markets are not confined to a particular place of work or any specific business hours unlike the stock exchange which operates from large buildings during 9-5 business hours. Thanks for modern technology in the realm of communications, all the best financial institutions in the world can utilize services of exchange markets immediately from any location, 24 hours a day.
Central banks play an important role in several ways. They are responsible for controlling currency reserves, adjusting the interest investment rate in the national currency in addition to being aware of factors that may influence an exchange rate. Beyond the Central banks are the national central banks which play an even larger role in the foreign exchange markets. National central banks attempt to mediate the money supply in addition to inflation as well as interest rates often with specific targeted (sometimes official sometimes unofficial) rates for their currency. Available foreign exchange reserve currencies are often used by national banks to bring stability to the market.
There are also firms that are involved in transactions of foreign trade. Any company that is involved with international trade tends to require both foreign supply (exporters) and foreign currency (importers) .
Investment funds are also regular participants in the foreign exchange markets. Companies that fall under this umbrella of participants include different kinds of international pension, investment, mutual funds, trusts, and insurance companies, all of whom understand and comply to logic that it is beneficial to have a diversified portfolio of assets. Thus the aforementioned companies will typically invest portions of their profits in securities of the governments as well as in corporations who operate in different countries.
Broker companies are also players in the foreign exchange markets through their role of bringing together a sellers and buyers of foreign currency and helping to facilitate a conversion agreement between them. A broker company's function involves meeting both the seller and buyer of some specified foreign currency and acting as a mediator between the two of them for either credit-depositary operation or conversion. An astute broker firm operates by raising the broker commission through some percentile that results from the sum of the overall transaction. Even though a general Forex rule states that there is no fee as a percentile from the resulting sum of the equation or as a sum agreed upon in advance, broker companies will still take some kind of fee. They accomplish this by laying out their currency with a spread that will include a free within, similar to when the tax is already included in a quoted price.
Private people, also known as speculators are the last important key players in the foreign exchange market. Lay-persons are usually well aware of all kinds of non commercial transactions and occurrences in the realms of transfers of salaries, pensions, royalties, foreign tourism, and buying and selling foreign currency. In reality, almost all transactions that occur today are speculative in nature. Speculative psychology is what is used, internationally in the current functioning exchange system where people are making transactions involving money. This speculative psychology is absolutely necessary in a financial world in which a currency can lose a large percent of its value in only a few months and in which exchange rates move up and down on a weekly basis. Thus it would be foolish for a manager of a fund, who must compensate for inevitable declines, not to use speculation when making financial decisions.
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