Large banks need to exchange currencies constantly as a result of international trade. Imagine, for example, how much money Toyota need to repatriate in Japan each trimester. Sometimes, an exporter might decide to buy a large position on the options market to " freeze " a good exchange rate etc.
Banks that exchange currencies all day long use spreads that are razor-thin. They do not really use leverage like the retail traders. They simply have a credit relationship between themselves. They do many trades and they settle their books together at some point. There are also hedge funds who speculate on large positions. Their traders are obscenely overpaid professionnals. A handful of Mammoth banks dominate the market. Most smaller banks simply pass their orders to the Big Ones.
Retail traders can access the Interbank market only indirectly because brokers need to " bundle " our small contracts together before an institution will accept to be the counterparty. Of course, retail traders can also trade small lots between themselves. There can be many layers of intermediaries between " Us " and " Them "
For every position, there is a counterparty. The one info that can be useful to the retail trader is " where do the Big Ones stand compared to us ? "
Often times, retail traders will be on one side and institutions on the other side. That is the SSI: the speculative sentiment index. A SSI of 3 would mean that there are three times as many traders that are long than traders that are short. Since the value in dollars of the long and short is necessarily equal on both sides , that means retail traders are generally long and the Big Guys are generally short ( in this example ). Institutions are more often right than wrong in the short term. ( in other words, the short each hold a position that is on average 3 times as large as the long so the Big Ones have got to be on the short side, at least the majority of the Big Ones ).
For traders here who believe marketers who promise a 20% monthly return with a 299 dollars EA, reflect that, if those robots worked, banks would nt bother paying 1 million/year to their traders. They d buy the EA for 299 and let it run...The only use banks have for some automated systems are " safety systems " that can liquidate positions faster than any human in case of abnormal market conditions.It s a kind of autopilot that removes the control from the human pilot because it detected that the plane will crash.
If you plan a career with a large institution, you certainly need a degree in Finance. When you have your degree, you can go work for the Société Générale and blow 3 billion dollars of your employer s money like that french guy, Jérome Kerviel, did and you ll attain immediate fame.