There are two main players on the foreign exchange Sydney and they are traders and investors. It is important that you understand what these players use the market for and where you fit in. There are certain major investors that can cause issues for the traders and you should know what this is.
The Major Investors of the Foreign Exchange Sydney
There are certain major investors that use the foreign exchange Sydney and you need to know about them. There are four major investors that you should pay attention to:
- The investment banks – investment banks help business start up and they will buy and hold positions on the forex market.
- The mutual fund – there are a lot of people who look at mutual funds as a means of making money. These funds make their money through other means such as investing on the market. They cannot act as traders by law.
- The institutional investor – these investors are large companies that hold large amounts of currency to make a profit from this.
- The retail investor – the retail investor does not have a very big impact on the forex market because they generally do not hold the same volume as other investors.
The Difference Between Traders and Investors
There are a lot of people who feel that investors on the forex market are actually traders. The truth is that this line can very easily be blurred because of the way investors work on the market. When the investor opens a position they are essentially trading. However, certain investors like mutual funds are not allow to actively trade by law.
Where You Fit?
As a retail trader you might wonder where you fit into the world of forex trading. The retail trader is actually the lowest rung on the forex market ladder. Investors and major traders are able to cause movements in the market if there is limited liquidity or their trade is large enough. This is something that very few retail traders will ever be able to do.
As a normal retail trader you will simply make a profit from the market movements. This means that you wait for the market to move and profit from these clear movements. There are some cases where retail traders have been able to move the market, but these cases are rare and often done by professionals.
The Relationship between Trader and Investor
The fact that certain investors can move the market is a problem for many retail traders. Most market drivers have some form of warning that you can use to determine the price movement. However, investors will not publicise what they are going to do. This means that any market movement they create can be unexpected and move the market in the opposite direction you are trading in.
This is one of the reasons why you should look at liquid currency pairs. The more liquid the currency pair is the lower the impact of these high volume trades. When you trade with a low liquidity currency pair you are going to see volatility caused by investors.
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