The foreign exchange is one of the most widely traded markets in the world, with a total daily average turnover reported to exceed $5 trillion a day. The forex market is not based in a central location or exchange, and is open 24 hours a day from Sunday night through to Friday night. Read more about forex market hours here. A wide range of currencies are constantly being exchanged as individuals, companies and organisations conduct global business and attempt to take advantage of rate fluctuations.
The foreign exchange market is used primarily by central banks, retail banks, corporations and retail traders. Understanding how each of these players interact with the FX market can help to determine market trends as part of your fundamental analysis.
- Central banks are responsible for managing their nation’s currency, money supply and interest rates. When action is taken by central banks, it is usually to stabilise the nation’s currency.
- Retail banks trade large volumes of currency on the interbank market. Banks exchange currencies between each other on behalf of large organisations, and also on behalf of their accounts.
- Corporations that have dealt with companies overseas have to take part in the foreign exchange market to transfer funds for imports, exports or services.
- Retail traders account for a much lower volume of forex transactions in comparison to banks and organisations. Using both technical analysis and fundamental analysis, retail traders aim to profit from forex market fluctuations