subject: What is an FX Dealer? [print this page] What is an FX Dealer? What is an FX Dealer?
The FX Dealer's Role in Forex Exchange Investment:
What does a Forex dealer, also known as an FX dealer, do? A Forex dealer handles foreign exchange investment opportunities by exchanging one currency for another. With exchange rates varying from second to second, it's very fast-paced, such that exchanges need to happen at just the right time in order for the Forex exchange investment to work and the FX dealer to make money.
The FX dealer's work is very exciting, but it's not without its risks. Forex exchange investment requires significant expertise in the market itself, and a knowledge of the risks one undertakes when doing so. To function as an FX dealer, you truly have to be an expert in the market, and you have to have enough knowledge to be able to manage the risk that Forex exchange investment entails.
Who (or what) is the FX dealer, exactly?
The "FX dealer" is often a commercial company or bank, or another entity like an investment management firm. Foreign exchange dealers can also be brokers and agents working for these entities. People who actually practice Forex exchange investment deals are generally small speculators or retail traders. We'll take a look at each of these entities and individuals, as the case may be.
Banks-
International banks are usually the largest "players" in foreign exchange investment, with the majority of transactions taking place through them. In fact, international banks can trade as much as $1 billion on a daily basis. They can do these trades on behalf of their own customers, or for their own accounts.
Commercial companies-
Commercial companies engage in Forex exchange investment specifically to buy something on the foreign market, rather than domestically. They trade a fraction of the volume in Forex exchange investment as compared to international banks, but they still have a significant impact on the number of trades and therefore on our foreign exchange rates in general.
Investment firms-
Investment firms handle clients' money, seeking to make it grow. Some examples of the types of investments they handle for clients include endowments, insurance, pension funds, and other investments. In general, investment firms become FX dealers specifically to work on behalf of their customers. In addition to this, they specifically deal in Forex exchange investment to get involved in foreign securities both for their own firms' sakes and for their customers.
Foreign exchange brokers-
Foreign exchange brokers are in effect "currency sellers" or "currency retailers." They have a relatively small percentage of the market as compared to other players, just 2% in general. However, their services are growing as more and more people get involved as individuals in foreign exchange trading. Foreign exchange traders or small speculators (those who engage in Forex trading as individuals for themselves and with their own money, not for any company) generally need brokers to help them handle their transactions; as more and more individuals get involved in foreign exchange trading, foreign exchange brokers' roles are likely to grow over time.
Small (Retail) speculators-
Small speculators are also generally known as "Forex traders" on an individual basis. They trade with their own money on the Forex market, and often use Forex brokers' services to help them facilitate their trades.
