The Forex market has been particularly active since the 1970s and in the USA, like in the rest of the world, it has gained popularity over the past 40 years. Brokers have developed easy to use, online trading platforms that have simplified the process of trading and made it available from almost anywhere in the world.
Who Trades Forex?
The forex market has many players but also many types of players. Some of the major types of institutions and traders in forex markets are:
Commercial and Investment Banks
The greatest volume of currency is traded in the interbank market, where banks trade currency with each other and through electronic networks. Big banks account for a large percentage of total currency volume trades and also facilitate forex transactions for clients and conduct speculative trades from their own trading desks.
Central banks, representing their nations’ governments, are important players in the forex market and open market operations and interest rate policies of these banks influence currency rates to a large extent.
A central bank fixes the price of its native currency on forex, which is the exchange rate by which its currency will trade in the open market.
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Investment Managers and Hedge Funds
Portfolio managers, pooled funds and hedge funds make up the second-biggest collection of players in the forex market next to banks and central banks. Investment managers trade currencies for large accounts such as pension funds, foundations, and endowments.
Firms engaged in importing and exporting use forex transactions to pay for goods and services and companies trade forex to hedge the risk associated with foreign currency translations.
The volume of forex trades made by retail investors started out low compared to financial institutions and companies but is growing in popularity rapidly.
So, while large financial institutions and banks may have been responsible for a substantial portion of trading in the forex market, retail traders are getting in the majority since modern technology has also made it accessible to a broader base of customers.
It is much easier to become a Forex trader today than 30 years ago. All you need to start trading is internet access, the relevant software – which can usually be downloaded for free, and a broker’s account.
Read more: Managing Your Risks when Forex Trading.
How many forex traders are there in the world?
The forex market has become the world’s largest financial market, with the average daily trading volume growing from around 1.2 trillion in 1995, to 5.1 trillion in 2016, to about 13.9 million online traders in 2021 according to The Modern Trader study and research papers.
Considering the 13.9 million online traders in 2021, this means that there are one trader in every 561 people. Research also shows that traders are usually males between 25 and 50 years old.
Number of forex traders in the USA
Currently there is estimated to be more than 2 170 500 individual forex traders in North America. South America has about 868 200 individuals and Central America 484 745.
In Asia are over 4 630 400 traders and in Europe over 2 170 500 individuals, with a further 1 403 590 in the Middle East, 1 881 100 in Africa and 274 930 in Oceania.