Major Players In Forex And Styles Of Trading

Forex and Styles Of Trading

If you have learned the basic terms about forex trading, then it’s time to discuss the market participants to get a better idea as to who is into forex trading.

Commercial and investment banks

These banks are the foundation of the forex market, as all other players deal with them for participating in the market. Commercial and investment banks founded the foreign currency exchange, which started as an added service to deposits and loans. 

Central banks

Central banks are the second largest participants in the forex market. What makes them different from commercial and investment banks is their goal, which is to provide adequate trading conditions to traders in their home countries by controlling the money supply and availability. 

High-net-worth individuals

The third group consists of affluent individuals who have huge investable assets in millions, which doesn’t include their primary residence. 

Hedge funds

Then, there is a group consisting of hedge funds, which have joined later than all the aforementioned players. Hedge funds comprise net-worth individuals that work in partnership and incorporate large pools of investments, sometimes in hundreds of millions of dollars. 

Businesses of any size

Another group consists of businesses of any size, from small importers/exporters to multi-million enterprises. These players are called ‘commercial traders’ and they use financial markets to hedge their operations by offsetting exchange rate risks. 

Individuals

The last group consists of individuals who need to exchange some of their home currency for another currency, which could be the currency of a country they are traveling to. 

That was all about the market participants and now, we will discuss different forex trading styles. 

Before beginning your career as a trader, you should know about different types of traders and decide which trading style you wish to implement. 

Day Traders

Traders who buy and sell a series of trades in the forex market within the same trading day and close their positions before the market closes are called day traders. Day traders can be institutional or private, where the former means that the traders work at financial institutions and have several advantages over private traders, which include access to more resources, equipment, tools, a large amount of capital and leverage, direct access to data centers and exchanges and so on. 

Whereas, private traders work as freelancers or in partnership with other traders. Private traders trade with their own capital, but at times can trade with other people’s funds as well. Coinexx, Pax Forex, and LQDFX are some good options for day trading, as they provide tight spreads and fast trade execution. Commissions are also quite low, which is important if you are opening and closing multiple trades in a day.

Scalpers

Scalping is another quick trading strategy and the trader who does scalping is referred to as a scalper. In scalping, the position lasts only for a few seconds to a minute. However, if the trader leaves the position open for more than a minute, then that trading style won’t be called scalping, but day trading instead. Scalpers trade to register small profits and they expose their trading account to a very limited risk because they are in the trade for a very brief period of time. Traders who prefer the scalping style of trading often use high leverage because they want to amplify their profits. Those willing to try scalping can check out Turnkey forex, Eaglefx, or FX giants, as they provide leverage of 1:500 along with solid trading conditions. 

Swing Traders

Swing trading is a style where traders focus on the short-term momentum and try to capitalize on movements that continue typically from 1-4 days. The time span in swing trading will be more than a day but shorter than the ‘buy-and-hold strategy’, which includes opening positions for months or even years. This type of trading is great for beginners as it doesn’t restrict their horizons to a few hours like in day trading. A swing trader enters 3-6 trades in a week on average and strives to make good profits, from 100 to 300 pips. 

Position Traders

Lastly, there are position traders, which have the longest time frame in comparison to other trading styles. In this trading style, traders keep their positions open for several weeks to months with the sole purpose of registering a large number of pips per trade, ranging between 300 and 1000 pips. Here, traders make use of fundamental analysis to make their decisions. 

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