The foreign exchange (Forex) market is the largest and most liquid financial market in the world. It is a decentralized global marketplace where currencies are traded, and it has a daily turnover of more than $5 trillion. The forex market consists of two primary hierarchies: the primary hierarchy and the secondary hierarchy.
The primary hierarchy of the forex market consists of large banks, central banks, hedge funds, institutional investors, and retail traders. These entities make up what is known as the interbank market, which is responsible for setting prices on currencies around the world. This tier also includes currency speculators who take advantage of price discrepancies between different countries to make profits from their trades.
The secondary hierarchy of the forex market consists of brokers and dealers who provide access to trading platforms for retail traders. These brokers provide liquidity to smaller traders by connecting them with larger institutions in the interbank market through their trading platforms. Retail traders can access these platforms either directly or through third-party providers such as MetaTrader 4 (MT4).
In addition to providing access to trading platforms, brokers also offer other services such as educational resources, research tools, customer support services, automated trading systems (EAs), copy-trading systems (MAMs), etc., that help retail traders become successful in their trades. They also offer different types of accounts such as standard accounts, mini accounts, and micro accounts that allow traders to trade with different amounts depending on their capital size or risk appetite.
In conclusion, it can be said that understanding both tiers – the primary and secondary hierarchies – of the forex market is essential for any trader looking to succeed in this highly competitive industry. Knowing how each tier works will help you understand how prices are set in this global marketplace so you can make informed decisions when it comes time to trade currencies around the world!