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Forex market players – speculators

This is the largest group of traders in the $orex market is perhaps the most interesting of all as speculative traders come in all shapes and sizes. Their primary aim is to profit from the underlying movement in the foreign exchange markets with little interest in the currency per se, other than it is a financial instrument on which to bet. The largest players in this group are the proprietary dealing desks of the large banks who trade their own accounts, followed by the hedge funds, commodity trading advisers and currency overlay managers. All of these speculative groups have one thing in common – they have no interest in forex, other than to be on the right side of the market and to make money accordingly. They are not dealing on behalf of clients, nor are they hedging risks for their clients against future orders or deliveries – they are simply speculating on which way the currency rates are likely to move, just like you and me.

As a group, speculators are universally reviled and blamed whenever a currency, commodity or stock falls sharply, and as I outlined earlier, governments often feel obliged to introduce temporary restrictions on short selling, generally as a result of media pressure. The truth of the matter is that speculators do not create falls in markets, it is generally market hype and media attention that does the job for us. Indeed, central banks and governments themselves are often the worst culprits, intervening when currency rates threaten their exports or imports, or the overall balance of the economy.

One of the best ways to use this group in $orex tradingby using the COT report, which is released every Friday by the CFTC. The COT report ( known as the Commitment of Traders Report) details the futures positions of speculators in a broad range of markets, including commodities and currencies, and can be an excellent guide for retail traders, since the general view is that speculative forex traders are generally more right than wrong. At the time of writing, the net short positions are weighing heavily on the euro, suggesting that the euro will be sold off further, and will only recover once the speculators change their positions from net short to net long. The futures market in particular is an excellent guide to what speculators are thinking and doing in the forex market, as the futures market is dominated by speculative traders, and as a combined group are responsible for the majority of intra day moves in the forex markets.

Now finally, let’s look at the last group in the fx market – the corporates, and then I’ll move on to look at forex brokers in detail and which ones you should be considering for your forex trading account, and initially a $orex demoount.