Understanding Forex and Tiers

The speaker provides an overview of the various tiers of participants that exist in the forex market.  The first tier is comprised of federal banks, or other very large banks, who exchange currency internationally.  Second tier participants are large consumer banks and brokers.  Second tier participants trade money between themselves and with the first tier.  The third tier is primarily comprised of private investors or speculators looking to profit off of shorter term fluctuations.  Finally, the fourth tier is represented by tourists. 

These tiers were originally designed to be traded in lots of 1 million.  As the global economy progressed, there was a need for more granular amounts.  This is where the second and third tiers come into play.  They provide these smaller amounts.