This is where you and me fit into
the big picture of the forex market. If the vast majority of currency trading
volume is speculative in nature, then most of that speculation is short-term in
nature. Short-term can be minute-to- minute or hour-to-hour, but rarely is it
longer than a day or two. From the interbank traders who are scalping EUR/USD
(high frequency in-and-out trading for few pips) to the online trader looking
for the next move in USD/JPY, short-term day traders are the backbone of the
market.
Intraday trading was always the
primary source of interbank market liquidity, providing fluid prices and an
outlet for any institutional flows that hit the market. Day traders tend to be
focused on the next 20 to 30 pips in the market, which makes them the source of
most short-term price fluctuations.
When you’re looking at the
market, look in the mirror and imagine several thousand similar faces looking
back, all trying to capture the same currency trading gains that you're
shooting for. It helps to imagine this so you know you’re not alone and also so
you know who you’re up against.
The rise of online currency
trading has thrust individual retail traders into the mainstream of the forex
market. Online currency brokerage firms are referred to as retail aggregators by the institutional interbank market, because
brokerage firms typically aggregate the net positions of their clients for
hedging purposes. The online brokerages then transact with the interbank market
to managet heir market exposure.
