We know that the forex market has a very high polarity, even the highest among all other financial markets such as stocks and bonds, which are able to penetrate 5 trillion in a day, this of course proves that the perpetrators and the quantity quality of forex price movements are very high, this is of course because various kinds of things, one of which is because the forex market has two directions where we can buy and sell. Unlike stocks, we can only sell the shares we have bought.
So who are the biggest forex market participants?
Big bank
we know that big banks have their own policies, especially in determining interest rates in the world, there are lots of big banks that can determine how much interest rates exist in a country, but of course the policy must be based on how the economic conditions were at that time. so that the existence of these interest rates will usually have a very large impact on forex market participants, usually this bang bang is known as interbanks such as UBS, Citigrub and others, they are also the largest forex market participants in the world.
Government
the government is one of the very large forex market players, in this case, of course the role is the central bank of each government, there are many world-famous central banks such as the Bank of England, the Bank of Japan and the federal reserve which is the owner of the American central bank. . they are the main actors in market price movements they also have very large policies that are able to make policies that can move market prices fluctuately. such as the existence of big news such as the number of unemployed, as well as other big news.
Hedge Fund
Hedge Fund is a commercial institution that manages finances and acts as a fundraiser from investors. where the amount of funds managed by them is certainly very large because the source of funds obtained by investors is also very large. There are many examples of the largest Hedge Funds in the world, including the famous ones, namely JP Morgan asset management, Goldman Sachs Asset Management.
Multinational company
multinational companies are companies that have a multinational target market in the sense of between countries, they also have a very large role in the movement of the forex market this is due to the company’s need to buy and sell the products needed so they need to exchange currencies.
Retail traders
of course this is a very large number of forex market participants. These retail traders can be interpreted as individuals who take part in foreign currency trading and of course have a considerable impact on forex market movements
The forex market moves according to the mechanism of the difference between the quantity demanded and the supply. Trends in the forex market, both bullish and bearish, occur because of this imbalance. The market moves bullish when demand is greater than supply, and vice versa.
So, of course, the party that will move the market the strongest is the party that exerts the greatest demand pressure or supply pressure. The trick is to use large amounts of money. Purchases in large quantities will put pressure on demand which pushes prices up and at the same time can influence other market participants to do the same.
I’ve read from a source, reportedly to move the price by 1 pip in a major pair, it requires funds of 2 billion USD. So it means that if you want to move the price by 10 pips, you must need 20 billion USD. So if we really want to move the market that big, then just use that amount of money.
Now bro, TS discusses the lot used. You should know that the maximum lot that retail traders like us can use is 10000 lots. Using the calculation on a standard account, it means that every 1 pip will be equivalent to $100K. Now, just compare it with the 2 billion USD figure that I mentioned earlier, compare the 2 billion USD figure with the $100K figure, the maximum lot for retail traders is only 0.005% of the funds needed to move the price 1 pip. So if you’re just a retail trader, you don’t have to dream of moving the market, because we really can’t, after all, how many retail traders in the world are able to OP 10000 lots in one transaction? As retail traders, we can’t expect the market to follow us, we just go with the flow and follow market participants with big power.
The institution that has the strongest power to move the forex market is the central bank. However, considering that the forex market uses a currency pair system, the central banks of both parties have significant influence to make prices move bullish and bearish. Central banks with the most power are the Federal Reserve (USA), European Central Bank (European Union), Bank of England (UK), Bank of Japan (Japan) and Switzerlang National Bank (Switzerland).
Some people think that banks that are members of the interbank market are the parties that have the strongest power. But that’s actually not quite right. There are several reasons that make the central bank have the strongest influence to move the foreign exchange market compared to the interbank market, such as the very large foreign exchange reserve capital, the ability to change the reference interest rate to the ability to print money.
* Huge foreign exchange reserves
The value of each forex pair is highly dependent on the amount of demand and supply. If one day a pair like EURUSD is bullish, it means that the demand for the Euro is greater than the demand for the US Dollar. If the US central bank is interested in making the USD strengthen they can rely on large euro-denominated foreign exchange reserves to buy the USD and make the EURUSD bearish.
If the FED’s desire is to make the USD weaken to increase the competitiveness of export products, a USD sell-off can be carried out to convert it into Euros so that the Euro Dollar pair moves bullish. In the end, every central bank that has the most power is the one with the largest reserve currency.
* Printing money
When the central bank tries to help boost domestic economic growth, one way to do that is to print more money than before. There is enough money in circulation and people’s purchasing power increases. This condition will initially weaken the value of the domestic currency because there is greater supply than demand. However, over time with the emergence of the intention of more people to create a business and capital that is easier to obtain will make the value of the currency more stable or even strengthen against foreign currencies.
If the economic conditions have reached the upper limit and the inflation rate is soaring, it is a good time for the central bank to reduce the amount of money being printed. The impact tends to be negative for the community because they feel that it is increasingly difficult to get loan money from banks. A condition is created where the amount of demand is greater than supply which contributes to the strengthening of the value of the domestic currency for some time but if economic conditions worsen, the value of the currency also gradually weakens when compared to foreign currencies.
Notes:
Of course there are many parties who actually have an influence in strengthening or weakening the value of a currency (currency) such as the interbank market, export and import players, hedge funds, speculators with large capital to retail traders. However, all of them only rely on large capital, the larger their capital, the greater the influence, but all of them do not have the privileges such as the central bank which is able to change the interest rate and print money.
