The forex trading mechanism is very different from the stock trading mechanism either on the Indonesian stock exchange or other foreign exchanges. When you trade shares on the stock exchange, of course, you don’t have many choices for the stock price to buy. Share prices are determined by market movers & shakers. This means that all sellers and buyers in the stock market agree that the price is one. And this mechanism is called a centralized or centralized mechanism.
Unlike the case when you will do forex trading transactions you can get a variety of prices (spreads adjust). For example, when you will exchange SELL USD / IDR. When you will sell US Dollar (USD) to get a clear Rupiah (IDR) you will definitely choose the money exchanger that provides the highest amount of Rupiah (IDR) for every $ 1 US Dollars.
What is certain when you will exchange the USD currency to Mandiri, BCA, BNI, BRI or Money Changer owned by George or Thomas will definitely give different prices because they do not set the same amount of profit, namely the spread.
So the mechanism of forex trading like the example above is a trading mechanism that is not centralized or decentralized. With this mechanism, we have the advantage that we can get the best price.
And one of the advantages of forex trading is almost 24 hours a week (working days) we can do forex trading anywhere because this business is International business (world class) that takes place in real time.
Forex Trading Actor Hierarchy
When you already know how the mechanism of forex trading or if we call it in our daily language foreign currency exchange, at least you know, just this forex trader. So this business can be followed by all elements not least, we are commonly referred to as retail or small class players (means), which means that the capital is a little when compared to large institutions.
For more details, the following is a hierarchy of forex traders from large to small.
If we look at the hierarchy of forex traders above we can conclude or mention who the forex players really are. Among other things are banks (ranging from small to super large capitalists), hedge funds, large companies, and retail.
1. Biggest Bank
Since the mechanism of forex trading is decentralized, the biggest banks in the world will determine the price of the currency. And based on the number of requests (demand) and supply (supply) of the currency, they are the ones who are able to determine the price of buying / selling this currency pair.
Some of the largest banks in the world include UBS, Barclays Capital, Deutsche Bank, and Citigroup. Collectively they are commonly referred to as interbank markets and can also be called the Foreign Exchange Market!
2. Large Company
Large companies are also included in the forex market which can not be underestimated the effect on the price movements of currency pairs in the forex market. Large companies referred to here are those who use foreign currency for their business activities. For example, it is a company in our own country PT Pertamina (Persero) or PT Perusahaan Gas Negara that uses US Dollar (USD) for its business activities whose numbers are not small. Not only the two state companies that use USD for business activities, one example is the Erajaya company and these are just a few examples 🙂
3. Government and Central Bank
The government and the central bank are also forex traders, the government usually requires foreign currency for the needs of state expenditures for example to buy alutsita, import goods from outside countries and or to pay off foreign debt = ) (this is what makes people terrified).
For central banks usually do forex trading to maintain the value of their currency (inflation) when they raise or lower interest rates.
One of them is that you or I who fall into this category are those who want to enter the forex market and profit because of it. “Get in and out with maximum profit” even though this is a lot of things to do but in fact only 10% of people are able to do it from a total speculator.
This type is a type of forex trader that may be many in number even though the personal funds owned are not as big as those of the criteria 1, 2 and 3 forex trading players above.