Now with the introduction of the internet, the country
club environment of size and sophistication to access pricing has
now dissolved. With a new level playing field, retail investors and
day traders can now achieve very low transaction costs similar to those of the
smaller institutions. This is due to the fact that traders can be
bundled with others and seen as one fund. In addition these bundles
can be directly linked to the major banks substantially reducing
operational costs.
Today, online trading can
offer individual traders live streaming quotes and automatic margin
calls. This means that if a trade moves against you can be
automatically stopped out of the trade.
There are several market
participants:
-
Central
banks (Federal Reserve) occasionally intervene to correct the
value of their currency. The Federal Reserve banks like the bank
of England and Bank of Japan have very deep pockets however just
the word of mouth effect can influence
sentiment.
-
Banks
as well as being interbank providers of foreign exchange banks
also use their extreme buying power to trade this market. Having
an advantage of analyzing order flow they have an edge in placing
trades on the right side of the
market.
-
Hedge
Funds use the FOREX market for longer term trades in attempt to
balance out their portfolio of
funds.
-
Multi-national
Corporations use the FOREX market to hedge against exchange rate
risk
-
Individuals
investors seeking yield and
speculators
