From bonds, to stocks, commodities and forex, CFD trading is a field where a trader can explore several instruments to trade with. For today’s post, we shall talk about a foreign exchange market topic which I believe will capture your interest not just because of the fact that FX is the largest market in the trading world but also because of the importance of knowing about the basic facts regarding the said instrument. To jumpstart this lesson, let us review some of the common forex concepts which need to be mastered before finally talking about trading and dealing with major market players.
Financial Instruments that are related to Forex Trading
Remember that the FX market is the biggest market in the field of trading that is why it has the ability to be traded to the following instruments:
- 1.Currency pairs- Currency pairs are rates of two different currencies that are quoted against each other. In this pair, the first rate is called base while the other rate is called a quote.
- Forward Contracts- These are personalized agreements between the two traders where they both decide to perform a transaction at a definite date in the future.
- Currency Futures – Is a type of futures that involves the rate of a currency. It is being traded and processed like any other futures contract.
- Currency Options – This instrument allows a buyer to perform his right but not obliged to either purchase or dispose of a currency at a given exchange rate prior to or on a given date.
- CFDs – Someone who is into CFD trading should know that CFDs are instruments that involve payments based between the differences of settlement rates along a particular trading session.
Explaining Interbank Forex Market
Interbank Forex Markets are also known as Over the Counter Markets (OTC). This type of market involves a group of financial institutions that are loose and largely unregulated. When we say loose and unregulated, we mean that these groups have the ability to create exchange rate quotations to their clients as well as transact currencies from one member to another. In order to get a particular quotation, a has to call a market maker dealing desk.
Other Major FX Market Players
Aside from the Interbank Forex Market, the list below enumerates other FX market players who play a big role in each transaction.
Large Interbank Forex Market Players
Individuals working at big Interbank FX markets provide considerable liquidity to the currency market via given bid ask prices to clients. They also speculate for the proprietary trading accounts of banks. Deutsche Bank, UBS, Citigroup, Bank of America, Goldman Sachs and HSBC are some of the names that belong to this group.
Famous Foreign Exchange Traders
George Soros, Bill Lipschutz, Stanley Druckenmiller and Andrew Krieger. Do their names ring a bell to you? These are some of the famous FX traders who have made a great contribution to foreign exchange transactions by means of speculating mint trading currencies.
Retail Forex Market
These involve individual speculators who are into margin trading via an account given by an online FX broker through an electronic trading platform. This type of market is where CFD traders can transact their instrument for the sake of hedging and portfolio diversification.
Conclusion:
As much as CFDs have wide trading coverage and FX trading is one of them, knowing about the list of top FX market players helps a trader to create better strategies once they get involved with some or any of these groups.
