Traders in FX trading can be grouped into one of four basic types- bankers, brokers, customers and central banks. Bankers, banks and other financial institutions do the lions share of trading. They make profits buying and selling currency to each other. Approximately two-thirds of all Forex transactions involve banks dealing directly with each other.

Brokers or dealers sometimes act as intermediaries between the banks, helping them or other traders looking for a good deal find out where they can get the best currency trade. Buyers and sellers like working through brokers or dealers because they can trade anonymously through intermediaries. Brokers make profits on currency exchanges by charging a commission for the transactions they arrange.

Customers, which primarily are major companies, trade currency so they can operate globally or invest internationally. Companies that trade currencies regularly have their own trading desks, while others conduct their currency trading through brokers or banks.

Central banks like the US Federal Reserve, acting on behalf of their governments, sometimes participate in the Forex market to influence the value of the currencies of their respective countries. For example, if the Federal Reserve believes the dollar is weak, it may buy dollars and even encourage central banks of other countries to do the same in the Forex market to increase the value of the dollar.

Among the many factors that impact the value of a nations currency are business cycles, political developments, changes in tax laws and stock market news. Traders must monitor all these potential factors so that they can stay on top of political or economic changes that impact the value of the currencies they hold. Currency trading, like other forms of trading, is affected by the basic economic principle of supply and demand. When a large amount of one type of currency is available for sale, the market can be flooded with it and the price of that currency drops. When the supply of currency is low and the demand for it is high, then the value of that currency rises.