Lesson 3 Market Participants Sessions and Products

Explain why currencies are traded, distinguish instruments, and plan observations using correct time zones.

Different participants have different objectives

A business receiving USD but paying EUR may exchange currencies to manage its future expenses. A fund buying overseas shares needs currency exposure to complete the investment and may hedge part of it. Banks quote prices and manage inventories and client orders. Central banks implement policy and may conduct foreign exchange operations. A speculator accepts price risk in pursuit of a gain. These participants are not all trying to predict the next candle. A large transaction can reflect hedging, funding, or portfolio adjustment. Price movement alone does not reveal the trader’s identity or intention. The BIS analysis of global FX markets (https://www.bis.org/publications/qr-202512/global-fx-markets-when-hedging-takes-centre-stage) describes the roles of hedging, spot transactions, forwards, and swaps.

Identify the instrument

Instrument: Deliverable spot exchange; Basic purpose or structure: Exchange currencies for settlement under agreed terms; Detail to verify: Settlement date and delivery obligations
Instrument: Leveraged rolling forex or FX CFD; Basic purpose or structure: Contractual exposure to exchange rate changes, typically without delivery to the retail customer; Detail to verify: Counterparty, financing, close out rules, and local availability
Instrument: Currency futures; Basic purpose or structure: Standardised exchange traded contract with expiry and clearing; Detail to verify: Contract size, quotation, tick value, and expiry
Instrument: Forward; Basic purpose or structure: Agreement to exchange currencies at a future date on agreed terms; Detail to verify: Counterparty obligations and settlement

This course’s position size examples use the common OTC forex convention. Do not transfer its lot sizes directly to futures or noncurrency CFDs. CFDs are subject to product and client protections that vary by jurisdiction; for example, the FCA includes rolling spot FX within its UK CFD framework. FCA product guidance (https://www.fca.org.uk/firms/contract-for-differences).

Sessions and time zones

Trading activity passes through Asia Pacific, European, and North American business hours. The labels Sydney, Tokyo, London, and New York are convenient reference points. These sessions overlap; they are not guaranteed boundaries of opportunity. Liquidity describes how readily a position can be traded at available prices. Volatility describes the size and variability of price movements. They are different: a market can be active and liquid while still moving sharply. Spreads and execution can deteriorate around news, daily rollover, holidays, and market reopening. Write observations in UTC and record the platform’s server time alongside it. A London or New York session can shift relative to UTC when daylight saving time changes. Use the actual date and provider schedule instead of memorising one permanent local timetable.

Practice

Choose two observation windows that fit your schedule. For the same pair, record five bid and ask observations in each window, with UTC time and spread. Note scheduled news and any market closure. Compare the observations without claiming that ten samples establish a lasting pattern.

Check your understanding

After the four lessons in this module, complete Module 1 knowledge check from the course overview. It contains the three questions from each lesson with feedback after submission. Keep written calculations in your workbook.

Glossary

Ask: Price at which the customer can buy the pair
Bid: Price at which the customer can sell the pair
CFD: Contract for difference, creating contractual exposure to price changes
Financing: Charge or credit for holding a position under the contract’s terms
Hedge: Exposure intended to offset some existing risk
Liquidity: Ability to trade at available prices and size
Lot: A position volume convention; verify base units for the instrument
OTC: Over the counter, outside a central exchange
Spread: Ask minus bid
Volatility: Degree of variation in prices over a period