Types of Forex Traders
Foreign Investments Companies
Foreign investment companies are basically the investment
organizations which are carrying out foreign currency trading
operations in the market. These companies show great requirements
for a particular foreign currency. For example, if we talk about
foreign investment companies like importers of certain products,
that these firms would like to buy in bulk, a particular foreign
currency for trading and business purposes.
Same is the case with other investment firms like exporters of
certain products, who would like to sell a particular type of
currency more. These firms do not have a direct admission to Forex
market. They operate their conversion and depository processes via
commercial banks only.
Commercial Firms make for a sizable part of the Forex trading
market and a significant part of the market gets its way from the
economic activities of such firms which are looking for foreign
currency to pay for all the goods and services they employ.
As compared to the big financial companies and huge banks, these
commercial firms often trade a rather small amount of money, and
their trading mostly has a slight temporary effect on the overall
Trade flows, in terms of internationally big companies, becomes a
central issue in the lasting direction of a currency's Forex rate.
Some of these global giants are also capable of having an
impulsive impact on the market rates, especially when very large
positions are filled, of which, not many retail or individual
traders are aware.
In the world of Foreign exchange market, the maximum control is in
the hands of huge multinational banks and organizations. This is
because of the fact that their everyday degree of actions of
trading and market cross over billions of dollars.
With such a huge figure in their hands, it would not be wrong to
say that these commercial banks use up an indispensable amount of
exchange transactions. The banks can be said to gather through all
their clients, the growing and collective wants of the market for
currency exchange. Also, in addition to agreement of clients’
purposes, the banks can sometimes trade for their own operations
for their own means too.
Some of the well known international banks which are successfully
involved with Foreign Exchange are Chase Manhattan Bank, Deutsche
Bank, Citibank, Standard Chartered Bank and Barclays Bank to name
a few. Their huge quantities of transactions can lead to
noteworthy alterations in the currency rates. Mostly these big
commercial banks are divided into Bulls and Bears.
Bulls are those Forex market members who are concerned with the
escalating of currency rates.
Bears are those Forex market members who are concerned with the
depression of the currency rates.
By and large, the market is in a position where balance can be
maintained between bulls and bears.
Asset Management Companies
Asset Management companies are the ones which basically handle big
money accounts on behalf of their clients, like pension funds etc.
Such companies employ Foreign currency market to assist dealings
in foreign investments.
While such companies are into Forex market and trading currencies,
they take these transactions as secondary to their real investment
business, and hence, are not intended for revenue-maximization.
According to the BIS study of Triennial Central Bank Survey, year
2004, 14% were between a dealer and a non-financial company, 33%
concerned a dealer (ie a bank) and a finance manager and a major
53% of transactions were totally interbank.