Chapter 3

The Six Major Players

The forex market is exciting because it is made up of millions of participants. The constant buying and selling by these participants adds to the unprecedented liquidity found only in the forex market. This chapter focuses on the six biggest players in the forex market. They are:

1. Central banks
2. Commercial and investment banks
3. Multinational companies (MNCs)
4. Institutional traders
5. Retail forex brokers
6. Retail traders

We start with the central banks and the three ways in which they manage inflation. We then take a sneak peek into the banking world of proprietary trading and get a grip on the Volcker Rule. We also get to know the three biggest rogue traders in history. The segment on multinational companies (MNCs) presents two examples of how importers and exporters conduct hedging activities in the forex market to gain certainty of price. Finally, a look into the retail crowd shows us why forex brokers and high-frequency trading are exploding all over the world.


The main aim of central banks is to stabilize the country’s economy. They do this by monitoring one of the most important benchmarks in the economy: inflation.

Inflation is commonly defined as the rate at which prices of goods and services are rising. If the central bank does not tackle inflation swiftly, it can lead to an erosion of purchasing power.

In most countries, inflation is measured through the consumer price index (CPI). The CPI is a weighted average ...

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