Who Trades Forex?

How big is the forex market?

The Bank for International Settlements (BIS) says forex trading averaged about $9.5 trillion a day in April 2025. That total includes spot deals, which swap currencies now, and contracts to swap them at a later date.

This number counts deals. It is not a pile of profit for traders to share, and it is not all betting. One customer order can lead to several deals between banks.

In April 2025, news about US tariffs led to extra trading. Part of it came from investors protecting themselves against a weaker US dollar. That is why the BIS called its report "when hedging takes centre stage".

Who are the biggest forex market players?

The biggest players are big banks and firms. But they are not all making the same kind of bet. Here are the main groups and why they trade:

• Banks and dealers quote prices to customers and manage the currencies they hold.
• Businesses pay for goods abroad, bring income home and protect their budgets.
• Investors and funds buy foreign shares and bonds, which means buying the currency too.
• Central banks set interest rates, sometimes trade to steady their currency, and manage reserves.
• Speculators try to profit from the price move itself. This group includes hedge funds and retail traders like you.

Knowing why people trade is more useful than knowing famous names.

What do banks do in the forex market?

Banks and other dealers quote two prices: a bid to buy and an ask to sell. They earn the gap between them, and they manage the risk that customer trades create.

Say a dealer sells euros to a US importer in the morning. Then it buys euros from an exporter in the afternoon. The two trades partly cancel out. So the dealer does not need a separate market trade for every customer.

The price a customer gets depends on the size of the deal, the relationship, credit and market conditions. It is not just the line you see on an online chart.

Why do businesses and investors trade currencies?

Imagine a Canadian business that will receive US$100,000 in three months. It does not know what that money will be worth in Canadian dollars. So it may fix a rate today with a forward contract. Reducing a risk you already have like this is called hedging.

If USD/CAD later moves in its favour, the hedge gives up that gain. That is fine. The firm wanted a budget it could plan with, not a bet.

Investors face the same issue. A US fund that buys Canadian bonds also takes on the Canadian dollar, unless it hedges. Say the bonds gain 5% but the Canadian dollar falls 10% against the US dollar. In US dollars, 1.05 × 0.90 = 0.945, which is a loss of 5.5% before costs.

So a fund's currency trade can simply be part of buying, selling or protecting an investment. Read more in currency risk for Canadian investors.

How do central banks affect the forex market?

Central banks change interest rates and say what they expect to do next. That changes how attractive their currency is, without any trading at all. The lesson on what influences exchange rates shows how.

Some central banks also trade directly to push their currency up or down. This is called intervention. Managing the country's savings of foreign money, its reserves, is another job again. So not everything a central bank does is an attempt to set the exchange rate.

Policies differ by country. The Bank of Canada says the Canadian dollar floats and that it does not try to set the exchange rate. Read each central bank's own statements, not lists of officials, which go out of date quickly.

How do hedge funds and speculators trade forex?

Some players trade to profit from currency moves or from gaps between interest rates. Some hold a trade for minutes, others for months.

The most famous example is from September 1992. The UK government was trying to hold up the value of the pound. George Soros's fund had bet heavily that it would fall. The government gave up and the pound fell. According to Britannica, the fund made a profit of about $1 billion. Soros became known as "the man who broke the Bank of England".

We remember stories like this because they are so unusual. They say little about what suits a beginner with a small account, higher costs and less room for losses. Also, a fund's position may be a hedge inside a much bigger portfolio, not a simple bet.

Where do retail traders fit in?

Retail traders, meaning people trading their own money, usually reach forex through a broker or dealer. In US retail forex, the dealer is your counterparty, as the CFTC explains. That means it takes the other side of your trade, which is different from trading currency futures on an exchange.

Your chart cannot tell you that a certain bank is buying. A sharp move can come from news, or from dealers pulling back their prices. It can come from big players changing their positions, or from all of these at once. Be careful with stories about banks hunting your stop, unless there is real evidence.

Next lesson: forex market analysis. As you read it, ask what each method can really see, when so many players trade for so many reasons.