Who Participates in Financial Markets

Here is something most beginner traders never think about.

Every time you click buy or sell on your platform, someone is on the other side of that trade. Not a computer algorithm running in isolation. Not a random number generator. A participant, an institution, a bank, a fund, another trader, with their own view, their own analysis, and their own reasons for taking the opposite position to yours.

The market is not an abstract force. It is the combined behaviour of every single participant acting simultaneously. And those participants are not all equal. Some of them move billions of dollars with a single decision. Understanding who they are, what they want, and what drives their behaviour is one of the most underrated edges in trading.

Imagine you are playing a game and one of the players has the ability to change the rules mid game. That is roughly what central banks can do to financial markets.

Central banks control interest rates. Interest rates determine how attractive it is to hold a particular currency. And the attractiveness of holding a currency determines its value relative to every other currency in the world.

When any of these institutions speaks, markets listen. A single sentence in a press conference can move EUR/USD by 100 pips in seconds. An unexpected interest rate decision can wipe out weeks of gradual price movement in minutes.

In September 2022 the Bank of England was forced to make an emergency intervention to stabilise the UK government bond market after it collapsed following a controversial budget announcement. Billions of pounds were deployed in days. Traders who understood what was happening made fortunes. Traders who did not were caught completely off guard.

Central banks are not just participants. They are the architects of the environment every other participant operates in.

If central banks are the architects, commercial banks are the builders.

The majority of daily trading volume in forex, which BIS Triennial Survey data put at over $9.6 trillion per day as of April 2025, flows through commercial and dealer banks. Banks like JPMorgan, Deutsche Bank, Citigroup, and Barclays are constantly buying and selling currencies on behalf of their clients.

These banks also trade for their own profit. Their trading desks have access to enormous amounts of information, deep relationships with other market participants, and the ability to see order flow that retail traders simply cannot see.

What this means for you is that commercial banks leave marks on the market. Their large orders create price levels, areas where buying or selling was concentrated, that show up as support and resistance on charts. Learning to identify these levels is a fundamental part of technical analysis, which we cover in Module 2.

If you have ever seen a currency move 200 pips in an hour with no obvious news to explain it, there is a reasonable chance a large hedge fund was behind it.

Hedge funds are private investment vehicles that use aggressive strategies to generate returns. Unlike pension funds or mutual funds which have restrictions on what they can do, hedge funds can go short, use heavy leverage, and concentrate enormous positions in a single trade.

Hedge funds tend to move in and out of positions faster than asset managers, creating sharp price swings that can look chaotic to the untrained eye but often follow a logic once you understand who is likely behind them.

Every company that operates across borders is a participant in financial markets, often without thinking of itself as one.

An American technology company sells software subscriptions in Europe. Every month it collects millions of euros in revenue. At some point it needs to convert those euros into dollars to pay its US staff, its shareholders, and its tax bill. That conversion creates demand for dollars and supply of euros in the forex market.

Multiply this by thousands of companies doing the same thing in every direction across every currency pair, and you have a constant, predictable undercurrent of currency demand that flows through markets every single day.

This corporate flow is not driven by speculation or market views. It is driven by business necessity. Which means it is relatively predictable, and predictable flow, once you understand it, can be traded.

Compared to a central bank or a hedge fund, you as a retail trader are tiny. A large hedge fund might move $500 million in a single trade. You might open a position worth $5,000.

But here is what that comparison misses.

Retail traders collectively now represent a significant share of daily trading volume, particularly in forex, crypto, and indices. Technology has put institutional grade tools, real time prices, advanced charting, leverage, access to thousands of instruments, into the hands of anyone with a smartphone and an internet connection.

The edge for retail traders has never been size. It has always been agility. And agility, combined with the right knowledge, is more than enough to compete.