THE MAIN 'PLAYERS' IN THE FOREX MARKET

The five broad categories of participants are: consumers, businesses, investors, speculators, commercial banks, investment banks and central banks.Consumers, including visitors of countries, tourists and immigrants, do need to exchange currencies when they travel so that they can buy local goods and services. These participants do not have the power to set prices. They just buy and sell according to the prevailing exchange rate. They make up a significant proportion of the volume being traded in the market.Businesses that import and export goods and services need to exchange currencies to receive or make payments for goods they may have bought or services they may have rendered.Investors and speculators require currencies to buy and sell investment instruments such as shares, bonds, bank deposits or real estate.Large commercial and investment banks are the 'price makers'. They are the ones who buy and sell currencies at the bid-and-offer exchange rates that they declare through their foreign exchange dealers.Commercial banks deal with customers on one hand, and with the Interbank or other banks, on the other hand. They profit by utilizing the bid-and-offer spread. The bid price is the exchange rate that the buyer is willing to buy and the offer price is the exchange rate at which the seller is willing to sell. The difference is called the bid-offer spread. They also make profits from speculating about whether the exchange rate will rise or fall.Central banks participate in the foreign exchange market in their effective duty as banks for their particular government. They trade currencies not for the intention of making profits but rather to facilitate government monetary policies and to help smoothen out the fluctuation of the value of their economy's currency.

Mange Your trading System With SigmaForex

Many times the traders talk about trading systems they wrote themselves that worked for awhile and then mysteriously stopped working. They assumed that there was something wrong with their system, so they moved onto another approach. But the problem may not have been the system, but rather that the market environment had changed and the trader did not recognize it.
This happens quite often and is one of the main reasons that good trading systems get tossed aside. So to keep this from frequently happening, the first rule of any trading system should be one of the oldest pieces of advice from many experienced traders.SigmaForex advises you to always trade in the direction of the trend.
If the market is in an uptrend, only look for buying opportunities and if the market is in a downtrend, then only look for selling opportunities. This would seem as obvious as knowing that walking downhill is easier than walking uphill, but yet traders get so caught up in looking for that perfect entry, that they forget to take a step back and take a look at the big picture, which is the direction of the trend.
Quite often the best approach in trend analysis is to create a daily chart of the EUR/USD with one year of trading activity and make a note of your opinion of the trend. You then work your way through all of the other currency pairs to do the same. You can then compare to see which pairs are in the strongest up trends and strongest downtrends. These would be the currency pairs to use when looking for a trade.
You should be very picky as your trading results will depend on your choices.Since you also have a directional bias based on the direction of the trend, the process of finding a trading opportunity becomes a little easier. For those of you who like to quantify your choices, we have posted a daily chart of the EUR/USD with three months of trading activity. Also plotted on the chart is the most popular of all technical indicators, a 200-day Simple Moving Average.Note that all of the candles are above the moving average.
This is an example of an uptrend. If all of the candles were below the moving average, then this would be a downtrend. If candles were both above and below the moving average, we would consider trend weak and not trade that particular currency pair. You can use any moving average value on any time frame chart, but the technical analysis on the longer-term charts are more reliable, with the daily chart being the best.
But by quantifying it like this, we are each able to find what combination works best for our own system. That is what using a system is all about. Next week we will look at the activity within a trending move to find a trading opportunity.