Trading in the huge forex market is made possible through market makers. Most traders have questions and face some confusion about who exactly these market makers are and what exactly their functions are.

Simply put, a market maker is a provider of a trading platform for foreign currency exchange.

They have real time information on current costs involved in investing in the currency market. They studiously watch foreign currency price movements including the ask and bid prices for each.

With this extensive knowledge, forex market makers help their clients reduce their chances of losing their forex investments.

A forex market maker is neither a market intermediary nor an agent.

Who Are They?

Most commercial banks can be considered forex market makers as they are deeply involved in the exchange of currency. Other market makers include forex brokers and other currency exchange businesses.

Market makers are usually companies involved in the buying and selling of financial resources and they typically do not charge percentage fees or commissions to serve each of their customers.

Do Market Makers Trade Against Their Customers?

There is a lot of sentiment in the market that forex market makers make their profits from trading in the opposite direction of their customers.

This is a misconception as all market makers are mandated to work with their customers. In fact, it is to their advantage to work with their customers.

The nature of being a forex market maker requires the market maker to buy and sell currency to traders who want to enter the market.

To do this, market makers always provide their customers with both the buying and selling prices and they do not offer any advice to their customers on what currencies to buy or which ones to sell.

However, they do offer expert information on different trade positions. Market makers have good policies on minimizing risks and are required to adhere to strict codes guided and supervised by market authorities.

Do Market Makers Influence the Forex Market?

The term “market maker” can be said to cause the confusion associated with the function of market makers. It implies that market makers hold some sort of influence over the market or even determine market prices.

The forex market is a huge global market which is impossible to manipulate. The forex market is characterized by instant online transactions made globally and a constant 24-hour flow of information across the internet.

Market makers simply connect buyers and sellers to the market but do not hold any sway over the market or currency price action.

How Market Makers Profit

As mentioned above, market makers do not charge percentage fees for forex trade. Additionally, they do not trade against their clients. They derive their profits from the bid/ask spreads.

They earn very small profits on each trade derived from the difference between bid currency prices and ask currency prices.