Just lovely discussion :)

I don't believe that the majority of operations is speculative. Thousands of companies are HEDGING (through their banks) hundreds of billions of dollars in the forex market in order to not be a victim of currency fluctuations (due to overseas operations). Also the banks themselves hedge themselves against daily currency risks.

Thus, my conclusion: I think the majority of operations comes from hedging. Only a tiny part will come from speculation.

To each their own, but if you ask me, I would suggest that you try to think not just in terms of "who" drives the forex market (which is what you asked), but more importantly "what" moves it, i.e. the specifics of how the market moves. This is because, while trading (and assuming you have no insider information), you can't really know "who" is buying/selling, but you can read the tape, and reading the tape is more concerned with the nature and mechanics of orderflow.

The forex market is driven by excesses in buying vs selling volume (supply vs demand), or vice versa. The movement of a currency's relative price happens when there is an unbalance between the "bid" volume vs the "ask" volume present in the market at a given point in time. So simply put, the movement of price from one point to another is a direct result of that temporary disequilibrium.

As for the nature of the participants involved with high enough volume to be responsible for driving the market, pip_seeker has already given a nice summary on those.

pip_seeker

FT.com: "US retail FX: War waged on cowboy practices"

Retail forex traders don't have any major weight in the real forex market in terms of volume, and won't have it in any foreseeable future.

In simpler terms, the market is moved primarily by Governments and very large banks (i.e. Goldman, Deutsche Bank, JP Morgan, etc).

Retail traders play a very small part in the movement of the overall market. US retail traders only trade the minis cal fraction of the market movements. When you think about retail scalpers, they trade the smallest portion of market movement with huge amounts of capital while longer terms retail traders look to hold their positions even longer, but still considered a fraction of market movement.

Marv ... nice chart! Where did you get that information?

I got it from the updated forex wiki page. The actual source of those stats is the Euromoney FX survey which is considered "the largest global poll of foreign exchange service providers."

This article here has some good info as well.

I think many people here think that the market is more little than it truly is.

There are many entities that move the market, and most of the time they don't act in the same time or in the same "direction" (that's why market is soo chaotic).

Also it's very interesting how all the markets are inter-linked, take for example the usa stock indexes (dowjones, nasdaq etc.) and oil, gold, eur and usd.

They all are parts of an unique market, and are highly correlated.

So, if some market mover (a big one) can move the usd index of 50 ticks, inevitably the eur may lose 30ticks, the oil can make 60 ticks, the dowjones maybe 40 ticks, and the chf lose 40 ticks.

This is just an hypotetical example, however you may have noticed that this kind of situations are the normal behaviour of market.

So, returning to our example, if this big mover buy tons of usd-index futures and let it earn 50 ticks, there is no technical sense that other markets magically move in defined directions (correlation) in range of 40-60 ticks (or much more), without actually having an orderflow that permit them to move on such way.

But it happen everyday.

The market is a very big phenomenon with a surface similar to water, where you create a movement in it's surface, the movements expand affecting other areas of the surface, without the need of a big market mover or big dogs.

The market it's an entity where no individual (banks, corporations, billionaires etc) is able to control it (yes you can cause a 40ticks movement on some instrument, but everything that happen after such movement is out of your control, this let you in the same level of all other traders, with same risks of finding resistances and facing a temporanely floating loss, eventually a big reverse of the market and consequentially a big move on the other side).

So, the money that you have on your account are important, but if you eventually lose money with your trading, the situation would be the same or worse when you have much bigger money to move.

At this point, i think that the money that you have on your account are not important at all for success, it's about informations, understanding what's happening among all the other market partecipants (worldwide), you can do it with foundamental analysis, technical analysis, feeling, everything that can help you to understand what's happening on a particular "moment" ("moment" is subjective, it can be a 5 minutes timespan, a full day, a month, a year, etc., it depend on your needs).

Who move the market?
Thousands of entities in every moment, acting on different part of it and affecting it's wholeness.

Do they have any edge doing it?
No, no edge at all.

Can we forecast the future prices movements?
Impossible to do it accurately just looking at the past movements by looking charts.

It would be good to have a very big online database updated every x minutes, showing all the exposures of every market partecipant on every instrument, (brokers, banks, etc., every market partecipant), in this way you would be really able to access the informations needed to make really accurate analyses and eventually forecast future price movements.

Yes it would be a very good tool to use!