🟦 CHAPTER 4: WHO TRADES FOREX? Understanding the players that move the $7.5 trillion FX market.

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4.1 Introduction

The Forex market is massive, but it is not controlled by one person or one institution.

Millions of participants trade currencies daily — but some players have more power than others.

To become a consistently profitable trader, you must understand:

• Who moves the markets

• Who follows the market

• Who gets trapped

• Who creates liquidity

• Who consumes liquidity

Different market participants → different motives → different impacts on price.

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4.2 The 6 Main Types of Forex Participants

The Forex market is dominated by six major groups:

1️⃣ Central Banks

2️⃣ Commercial Banks

3️⃣ Hedge Funds & Financial Institutions

4️⃣ Corporations (Export/Import Companies)

5️⃣ Liquidity Providers & Brokers

6️⃣ Retail Traders (individual traders like you)

Let’s understand each one clearly.

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4.3 Central Banks – The Most Powerful Players

Central banks control a country’s monetary policy.

Examples:

• U.S. Federal Reserve (USD)

• European Central Bank (EUR)

• Bank of England (GBP)

• Bank of Japan (JPY)

• Reserve Bank of India (INR)

  
  

What they do:

✔ Set interest rates

✔ Control inflation

✔ Strengthen or weaken their currency

✔ Intervene in USD, EUR, GBP, JPY markets

Impact on traders:

When a central bank speaks, the market explodes — especially GOLD (XAUUSD), USD pairs, and JPY pairs.

They create some of the strongest moves in the market.

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4.4 Commercial Banks – The Real Market Makers

These banks trade billions daily:

• JP Morgan

• Citibank

• Deutsche Bank

• HSBC

• Barclays

They make up the interbank forex market, which controls most global liquidity.

What they do:

• Buy and sell currencies for clients

• Trade for profit

• Move billions in milliseconds

• Create liquidity zones

• Influence trend direction

Impact:

Commercial banks create the big waves that retail traders try to ride.

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4.5 Hedge Funds & Investment Firms

These institutions trade Forex to generate high returns for investors.

They include:

• Hedge funds

• Investment funds

• Proprietary trading firms

What they do:

✔ Use advanced algorithms

✔ Hunt liquidity

✔ Enter large positions

✔ Influence big moves on Gold, NAS100, and major pairs

These players follow smart money concepts —

and retail traders often lose by trading against them.

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4.6 Multinational Corporations

Companies that operate in different countries must convert currencies.

Examples:

• Apple

• Toyota

• Amazon

• Tata

• Samsung

Why they use Forex:

• Paying international employees

• Buying raw materials

• Hedging currency risks

• Handling import/export transactions

  
  

They don’t trade for profit — they trade for business operations — but they still influence price.

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4.7 Liquidity Providers & Brokers

Liquidity Providers (LPs) connect:

Banks ←→ Brokers ←→ Traders

Top LPs include:

• Goldman Sachs

• Morgan Stanley

• IC Markets LP

• LMAX

• CitiFX

What they do:

✔ Provide price quotes

✔ Provide buy/sell liquidity

✔ Bridge between markets

✔ Ensure orders get filled

Without LPs, Forex would not function smoothly.

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4.8 Retail Traders (Individual Traders)

Retail traders = people like YOU using:

• MT4

• MT5

• cTrader

• Prop firm accounts

Retail traders make up 5–10% of daily volume.

Characteristics:

• Use small capital

• Often emotional

• Often lack discipline

• Frequently hunted for liquidity

Most retail traders lose money because:

✔ They trade against the trend

✔ They use huge lot sizes

✔ They fall for fake breakouts

✔ They don’t understand institutional behavior

But with proper education, retail traders can be very profitable.

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4.9 So Who Actually Moves the Market?

Market movers:

✔ Central Banks

✔ Commercial Banks

✔ Hedge Funds

✔ Liquidity Providers

These players cause:

• Major trends

• Sharp reversals

• Liquidity grabs

• Fake breakouts

Retail traders never move the market.

They only react to what big players do.

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4.10 Why This Knowledge Matters for You

Understanding who trades Forex helps you:

✔ Avoid trading against smart money

✔ Identify where liquidity sits

✔ Understand why fake breakouts happen

✔ Follow institutional flow

✔ Improve your win rate

Most retail traders lose because they think the market moves randomly.

But the truth?

The market moves based on institutional behavior — NOT retail behavior.

If you learn to read institutional movement (order blocks, liquidity, BOS/CHOCH), you will trade with the big players.