Last Updated: January 20, 2022
Last time I posted about what Forex is simply so that it could be understood easily. Now, I am going to write regarding the players of Forex, in which these are market participants that move the Forex market. Why do these players are really important? Well, because they could move the Forex market where if you have learned supply and demand theory you would see that the Forex market is moved by that theory. So who are the players of Forex? Based on what I read from Dicks (2010, p. xvii) the players of Forex consist of:
Banks
Banks need to trade currencies because there must be clients of banks who want to exchange their currency to another currency whether it is for personal use or other uses. For example, you have Rp 50 million (IDR) and you want to exchange it for a dollar currency (USD) which you intend to use to travel to the United States of America (USA). From the example, it is clear that what you have to do is to trade it to the bank associated with your saving account and request the bank to exchange your IDR to USD. Thus, you would have USD in your hand.
Businesses
Let me give you an example to have a better understanding of the players of Forex and how they use it (I mean, on what purpose). Okay, the example is like this. Mr. Andre (Hahaha I used my name) is an Indonesian food businessman and he wants to import food ingredients from another country like meat from Australia. So, what he will do is to convert his IDR to AUD (AUD/IDR) which is around Rp 10.000 to get 1 AUD (A$1). After Mr. Andre knows the price of Australian meat which then he would convert it following the price of Australian meat. After that, Mr. Andre just has to pay the vendor meat that he trusted in Australia and wait for the meat to be sent to Indonesia.
Investors (Public and Private)
These public and private investors also trade in the Forex Market that may have a goal to speculate or trade the currency for a long-term gain or just to save it as their reserve currency. An example of investors could be seen from, let us say, Bambang who wants to trade in the Forex market in order to gain a return on its investment. To gain what Bambang wants to achieve in the Forex market, he has analyzed a specific currency where Bambang thinks that the price would go up in the future (maybe for a year). Knowing this, Bambang finally buys that currency and then sells the currency when the price is showing signs of weakness.
Conclusion
Those players have goals to be achieved. For example, it
could be to trade one currency to another like USD/IDR is Rp 14.000 (to get $1)
for a specific reason. This means the purposes for which you exchange one
currency for another currency are variables. It could be for export and import
business, traveling to another foreign country, etc. In short, there are three main players of Forex, that is, banks, businesses, and investors (whether it is public or private) who move the Forex market due to their needs.
Written by Andre I.
Reference
Dicks, James. 2010. Forex Trading Secrets: Trading Strategies for the Forex Market. New York: McGraw Hill.